Fortnightly - Chevronhttp://www.fortnightly.com/tags/chevron
enDigest (February 2015)http://www.fortnightly.com/fortnightly/2015/02/digest-february-2015
<div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - February 2015</div></div></div><div class="field field-name-field-import-image field-type-image field-label-above"><div class="field-label">Image:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/DIG-HalifaxSolarProject.jpg" width="875" height="471" alt="Duke acquires Halifax Solar Project in Roanoke Rapids, N.C." title="Duke acquires Halifax Solar Project in Roanoke Rapids, N.C." /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/DIG-Siemens-H-Class-Gas-Turbines.jpg" width="607" height="406" alt="Siemens to install its H-Class gas turbine in Plock, Poland" title="Siemens to install its H-Class gas turbine in Plock, Poland" /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/DIG-SolarArrayDetroit-IKEA.jpg" width="875" height="538" alt="IKEA will expand its solar array atop its store in Canton, Mich." title="IKEA will expand its solar array atop its store in Canton, Mich." /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><h4><b>M&amp;A</b></h4>
<p><b>Duke Energy Renewables</b> (Duke) acquired the Halifax Solar Power Project, a 20-MW solar project in Roanoke Rapids, N.C., from <b>Geenex</b> and <b>ET Solar Energy Corp. </b>Duke will own and operate the site. The project is located in <b>Dominion</b> <b>North Carolina Power</b>'s service territory, and the energy generated from the solar site will be sold through a 15-year agreement with the utility. The system employs 866 AE 3TL string inverters of 23.2KW AC capacity each and has about 100,000 ET Solar and Chint solar modules.</p>
<p><b>Dominion Resources</b> agreed to purchase <b>Carolina Gas Transmission</b> (CGT) from <b>SCANA Corporation </b>for approximately $492.9 million. The transaction would include no assumption of debt and, upon closing, would be immediately accretive to Dominion's operating earnings per share. Subject to board approvals by Dominion and Dominion Midstream Partners, Dominion expects to contribute CGT into Dominion Midstream for a combination of debt and units by mid-year 2015.</p>
<p><b>ALLETE Clean Energy</b> (ALLETE) finalized the acquisition of Storm Lake 1, a wind generation facility in Storm Lake, Iowa, adding another 108 MW to its renewable energy portfolio. ALLETE paid $15 million to <b>NRG Energy</b> to acquire the facility, which is adjacent to Storm Lake 2, a 78-MW wind farm purchased by ALLETE earlier this year. Both Storm Lake installations use 750 kW Zond turbines and are adjacent to each other in northwest Iowa.</p>
<p><b>Pattern Energy Group</b> (the "Company"), acquired the 200-MW Logan's Gap Wind project in Texas, which is currently under construction, from <b>Pattern Energy Group LP</b>. The Company acquired the Logan's Gap Wind project for a total cash funding commitment of approximately $113 million, a portion of which will be used to pay down construction debt upon the completion of construction. The acquisition will be funded from available cash and credit facilities.</p>
<p><b>Entergy </b>subsidiaries, <b>Entergy Arkansas</b>, <b>Entergy Gulf States Louisiana</b>, and <b>Entergy Texas</b> signed an agreement to acquire the Union Power Station, a highly efficient, natural gas-fired 1,980-MW generating facility. The station is owned by <b>Union Power Partners, </b>an independent power producer, and wholly owned by Entegra TC. The Union Power Station, which entered commercial service in 2003, consists of four combined-cycle gas-fired generating units, or CCGTs, each rated at 495 MW. Under the asset purchase agreement, Entergy Arkansas and Entergy Texas have each agreed to acquire one unit and Entergy Gulf States Louisiana has agreed to acquire two units. Entergy New Orleans will receive 20 percent of the output from the Entergy Gulf States Louisiana units via an at-cost PPA, subject to city council of New Orleans approval. The plant purchase price is $948 million, subject to adjustments.</p>
<p><b>Starwood Energy Group Global</b>, a private investment firm focused on energy infrastructure, announced that an affiliate has entered into an agreement with <b>Lakeside Energy </b>to acquire <b>Lakeside Generation</b>, a 369-MW portfolio of three natural gas facilities, one located in Pennsylvania and two in New York. The portfolio consists of Hazleton, a 158-MW peaking facility in Pennsylvania; Syracuse, a 103-MW combined-cycle facility in New York; and Beaver Falls, a 108-MW cogeneration combined-cycle facility in New York. Hazleton sells capacity and energy into the PJM power market, which serves 13 states and the District of Columbia. Syracuse and Beaver Falls sell capacity and energy into the NYISO power market, which serves the state of New York. Financial terms of the transaction were not disclosed.</p>
<p><b>ONEOK Partners</b> completed the acquisition of natural gas liquids pipelines and related assets from affiliates of <b>Chevron </b>for approximately $800 million. ONEOK Partners now owns an 80 percent interest in the West Texas LPG Pipeline Limited Partnership and 100 percent interest in the Mesquite Pipeline, which collectively consists of approximately 2,600 miles of NGL gathering pipelines extending from the Permian Basin in southeastern New Mexico to East Texas and Mont Belvieu, Texas. ONEOK Partners is the operator of both pipelines. <b>Martin Midstream Partners LP</b> owns the remaining 20 percent of West Texas LPG.</p>
<p><b>NextEra Energy</b> and <b>Hawaiian Electric Industries</b> (HEI) announced a definitive agreement under which the companies have agreed to combine. The transaction, which is valued at approximately $4.3 billion, includes the assumption of $1.7 billion in HEI debt and excludes HEI's banking subsidiary.</p>
<h4><b>Transmission</b></h4>
<p><b>Minnesota Power's</b> Great Northern Transmission Line received another approval. <b>FERC</b> approved a facilities construction agreement required to build this 500-kV, 220-mile line that will run from the Canadian-U.S. border northwest of Roseau, Minn. to an expanded Blackberry electric substation east of Grand Rapids, Minn. The Great Northern Line, under development by Minnesota Power and the Manitoba Hydro subsidiary, has an anticipated in-service date of June 1, 2020. It will provide 883 MW of transmission capacity, of which 383 MW will be used to deliver hydroelectric power purchased from Manitoba Hydro to serve Minnesota Power's customers. Total project cost in the U.S., is estimated to be between $560 million and $710 million, depending on the final route of the line.</p>
<p><b>ABB</b> designed, manufactured, installed and commissioned a 1,200-kV circuit breaker - the highest AC voltage level in the world. Once the 1200-kV ultrahigh-voltage switchgear is fully operational, it will have a switching capacity of 10,400 MW - a switch capable of turning ON' or OFF' the electricity generated by 10 large power plants or the combined average annual electrical load of Switzerland and Denmark, within milliseconds. The circuit breaker is deployed at the 1,200 kV national test station constructed by <b>Power Grid Corporation of India</b> <b>Limited</b>, India's central transmission utility, at Bina in the central Indian state of Madhya Pradesh.</p>
<p><b>ITC Great Plains</b>, in conjunction with <b>Sunflower Electric Power </b>and <b>Mid-Kansas Electric</b>, placed the V-Plan high-voltage electric transmission line into service in western Kansas. The 122-mile double-circuit, 345-kV transmission line is designed to connect eastern and western Kansas in order to improve electric reliability, enable energy developers to tap into the transmission grid, and promote economic development in the region.</p>
<h4><b>Gas-Fired Generation</b></h4>
<p><b>General Electric</b> announced in mid-January that it had received an order from the Tennessee Valley Authority (TVA) for two high-efficiency 7HA.02 gas-fired turbine generators to replace three coal-fired units at the 55-year-old Thomas H. Allen Fossil Plant, located in Memphis, to refurbish the Allen plant as a gas-fired, combined-cycle installation. The coal-fired units will be retired as TVA works toward a December 2018 deadline from the U.S. Environmental Protection Agency to reduce coal emissions. GE's 7HA.02 gas turbines run on natural gas and are the world's largest and most-efficient 60-hertz gas turbines. In base-load operation, a 2X1 7HA.02 combined-cycle power plant, when compared to a typical coal fired power plant, will reduce carbon dioxide (CO<sub>2</sub>) emissions by approximately 65 percent and reduce both sulfur dioxide (SO<sub>2</sub>) and nitrogen oxide (NOx) emissions by over 95 percent. The TVA Allen plant will have the capacity to generate 1,000 megawatts of power in combined-cycle mode, the equivalent power that would be needed to supply 1 million U.S. homes.</p>
<p>The current coal plant was originally built by Memphis Light, Gas and Water Division and generates electricity for the Memphis area and a larger part of the western region covered by the TVA, as will the new combined-cycle plant. GE's 7HA technology offers a net combined-cycle efficiency of more than 61 percent, leading the industry with cleaner, reliable and cost-effective conversion of fuel to electricity. The gas turbines are expected to be delivered to the site in August 2016 with commercial operation planned for May 2018.</p>
<p>With the TVA project, 15 HA units have been ordered by customers around the world. In addition to the United States, GE's H-class technology has been embraced by customers in Japan, the United Kingdom, Brazil, South Korea, France, Russia, Germany and Turkey.</p>
<p><b>Siemens</b> was awarded an order for turn-key erection of a gas-fired, combined-cycle power plant, to be located in Plock, Poland, some 100 kilometers northwest of Warsaw, marking the company's first-ever turnkey project in Central Europe outside of Germany for installation of its Siemens H-Class gas turbine. The customer for the 596-MW plant will be PKN Orlen, Eastern Europe's largest mineral oil company. Commissioning of the plant is scheduled for the end of 2017. Siemens will build the single-shaft plant turnkey, and will supply the main components; an SGT5-8000H gas turbine, the heat recovery steam generator, an SST5-5000 steam turbine with an SCon-2000PF condenser, an SGen5-3000W generator, the electrical systems and the SPPA-T3000 I&amp;C system. Siemens will also be responsible for plant maintenance and service for a period of around 12 years.</p>
<h4><b>EVs &amp; Storage</b></h4>
<p><b>CODA Energy</b> announced the full interconnection and operation of the largest behind the meter lithium-ion energy storage system in the Los Angeles basin. The 1,054kWh / 510kW system was developed under a contract with South Coast Air Quality Management District and co-funded through California's Self-Generation Incentive Program. The project demonstrates the scalability of CODA Energy's peak shaving product architecture by managing demand charges for its facility headquarters. CODA began installations at the beginning of the year and already has nearly 3 MWh of energy storage installations with manufacturing, retail, and public sector customers.</p>
<p>Europe's largest battery-storage project was officially opened by the <b>Department for Energy and Climate Change</b> at Leighton Buzzard in Bedfordshire, England. <b>S&amp;C</b> <b>Electric Europe</b>, <b>Samsung SDI</b> and <b>Younicos</b> collaborated to deploy the technology onto a United Kingdom Power Networks substation. The fully automated 6MW/10MWh smarter network storage project will assess the role of energy storage in cost-effectively supporting the UK's Carbon Plan, and will save more than $9.4 million on traditional network-reinforcement methods. S&amp;C Electric Europe is the lead supplier to the $29.2 million project. Berlin-based Younicos contributed custom-built intelligent software architecture and components.</p>
<p><b>Eos Energy Storage</b> demonstrated its grid-scale battery system at <b>Pacific Gas &amp; Electric's</b> (PG&amp;E) smart grid lab in San Ramon, Calif., with the support of a $2.1 million award from the <b>California Energy Commission</b>. For the project, the company is partnering with PG&amp;E, the <b>Electric Power Research Institute</b>, <b>Lawrence Berkeley National Lab</b> (Berkeley Lab), <b>Stem</b>, and <b>ETM Electromatic</b>.The project will test Eos's Aurora product as the company ramps up manufacturing to deliver MW-scale batteries in 2016. The first of these systems, the Aurora 1000|4000, is a containerized DC battery system that can provide one MW for four hours of continuous discharge to shave system peaks and defer costly transmission and distribution upgrades. The battery also offers fast-responding surge capability to balance power fluctuations associated with intermittent renewable generation.</p>
<p><b>Puget Sound Energy</b> and <b>Renewable Energy Systems Americas</b> signed agreements to cooperate on launching an innovative battery storage project in Whatcom County, Washington. Electricity will be stored in battery modules that are as large as 40-foot shipping containers and will be capable of providing up to 18 hours of power during an outage<br />for the town of Glacier, Washington. PSE is working with Washington State's department of commerce in developing this pilot project. In July, the state's Department of Commerce Clean Energy Fund awarded PSE $3.8 million to engineer and construct a 2-MW, 4.4-MWh lithium-ion battery system at the existing PSE Glacier substation near State Route 542. Construction is expected to begin as early as June 2015.</p>
<h4><b>Microgrid</b></h4>
<p><b>Alstom</b>, and Singapore's <b>Nanyang Technological University</b>, collaborated to design, develop and deploy MicroGrid Power Mix Management (MPMM) solution in the context of the Renewable Energy Integration Demonstrator - Singapore (REIDS) initiative. The REIDS initiative, a first in the region will encompass the construction of a microgrid to manage and integrate electricity generated from multiple sources including solar, wind, tidal, diesel, as well as energy storage and power-to-gas solutions.</p>
<p><b>GE Global Research and GE Energy Consulting</b>, along with <b>National Grid</b>, the <b>Department of Energy</b> <b>National Renewable Energy Laboratory</b>, and <b>Clarkson University</b> partnered on a research project to improve the reliability and resiliency of electricity delivery in northern New York. Fueled by a $1.2M grant from the DOE's office of electricity delivery and energy reliability and a $300,000 investment from GE, this project will allow for the development of an enhanced microgrid control system (eMCS) designed to keep the town's electricity system up and running for several days should it become disconnected from the main power station.</p>
<p><b>Eaton</b> will provide electrical engineering services and power distribution equipment for the construction of a 5-MW solar microgrid system in Annobon Province, an island off Equatorial Guinea in West Central Africa. The microgrid has battery storage and is designed to supply reliable and predictable power to meet the off-grid community's energy demand. It will be the largest self-sufficient solar microgrid project in Africa. Eaton was contracted to optimize the electrical power distribution equipment for the project by MAECI Solar, a division of Management and Economics Consulting.</p>
<h4><b>Natural Gas</b></h4>
<p><b>FERC</b> issued an order approving construction of <b>Constitution Pipeline's </b>proposed pipeline to increase natural gas supply to New York and New England markets, subject to certain conditions that will ensure the protection of natural resources. FERC on Dec. 2, 2014 issued its certificate of public convenience and necessity for the 124-mile Constitution Pipeline. Assuming timely receipt of all remaining necessary regulatory approvals, Constitution Pipeline would begin construction as early as the first-quarter next year in order to help meet growing natural gas demand in New York and New England by the winter of 2015 or 2016.</p>
<h4><b>Renewable Energy</b></h4>
<p><b>Southern Company</b> subsidiary <b>Southern Power</b> plans to develop a 131- MW PV solar project in Georgia. The electricity and associated renewable energy credits will be sold to three Georgia electric membership corporations. Southern Power has selected <b>First Solar</b> to be the EPC contractor for the facility. Construction of the plant is scheduled to begin in September 2015, and the project is expected to achieve commercial operation in the fourth quarter of 2016.</p>
<p><b>Algonquin Power &amp; Utilities</b> achieved commercial operation of the 24-MW Phase I St. Damase Wind Project (St. Damase I) in Quebec under the terms of the PPA with Hydro Quebec. The project was completed on time and on budget. St. Damase I consists of 10 Enercon E-92, 2.35 MW wind turbine generators. The total capital cost of the facility was approximately $49 million, net of the Canadian Renewable and Conservation Expense tax incentive that was used to partially fund the project.</p>
<p><b>IKEA</b> plans to increase the solar array atop its Detroit-area store that opened eight years ago in Canton, MI. In September, IKEA began work on a 44,000-square-foot expansion to the store, atop which new panels will be installed beginning spring 2015, with a completion by summer. The 40,000-square-foot solar addition will consist of a 240.9-kW system built with 765 panels, and will produce 287,490 kWh more of electricity annually for the store.</p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/evs-storage-1">EVs &amp; Storage</a></li><li class="taxonomy-term-reference-1"><a href="/article-categories/natural-gas">Natural Gas</a></li><li class="taxonomy-term-reference-2"><a href="/article-categories/renewables">Renewables</a></li><li class="taxonomy-term-reference-3"><a href="/article-categories/transmission">Transmission</a></li><li class="taxonomy-term-reference-4"><a href="/article-categories/mergers-acquisitions">Mergers &amp; Acquisitions</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-department field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Department: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/department/digest">Digest</a></li></ul></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
<div class="field-items">
<a href="/tags/duke">Duke</a><span class="pur_comma">, </span><a href="/tags/geenex">Geenex</a><span class="pur_comma">, </span><a href="/tags/et-solar">ET Solar</a><span class="pur_comma">, </span><a href="/tags/dominion">Dominion</a><span class="pur_comma">, </span><a href="/tags/carolina-gas">Carolina Gas</a><span class="pur_comma">, </span><a href="/tags/scana">SCANA</a><span class="pur_comma">, </span><a href="/tags/allete">Allete</a><span class="pur_comma">, </span><a href="/tags/nrg">NRG</a><span class="pur_comma">, </span><a href="/tags/pattern">Pattern</a><span class="pur_comma">, </span><a href="/tags/entergy">Entergy</a><span class="pur_comma">, </span><a href="/tags/union-power">Union Power</a><span class="pur_comma">, </span><a href="/tags/starwood">Starwood</a><span class="pur_comma">, </span><a href="/tags/lakeside">Lakeside</a><span class="pur_comma">, </span><a href="/tags/oneok">Oneok</a><span class="pur_comma">, </span><a href="/tags/chevron">Chevron</a><span class="pur_comma">, </span><a href="/tags/ferc">FERC</a><span class="pur_comma">, </span><a href="/tags/constitution-pipeline">Constitution Pipeline</a><span class="pur_comma">, </span><a href="/tags/martin-midstream">Martin Midstream</a><span class="pur_comma">, </span><a href="/tags/nextera">NextEra</a><span class="pur_comma">, </span><a href="/tags/hawaiian-electric">Hawaiian Electric</a><span class="pur_comma">, </span><a href="/tags/minnesota">Minnesota</a><span class="pur_comma">, </span><a href="/tags/abb">ABB</a><span class="pur_comma">, </span><a href="/tags/power-grid">power grid</a><span class="pur_comma">, </span><a href="/tags/itc-great-plains">ITC Great Plains</a><span class="pur_comma">, </span><a href="/tags/sunflower">Sunflower</a><span class="pur_comma">, </span><a href="/tags/mid-kansas">Mid-Kansas</a><span class="pur_comma">, </span><a href="/tags/general-electric">General Electric</a><span class="pur_comma">, </span><a href="/tags/siemens">Siemens</a><span class="pur_comma">, </span><a href="/tags/coda">CODA</a><span class="pur_comma">, </span><a href="/tags/bedfordshire">Bedfordshire</a><span class="pur_comma">, </span><a href="/tags/sc-electric-europe-0">S&amp;C Electric Europe</a><span class="pur_comma">, </span><a href="/tags/samsung-sdi">Samsung SDI</a><span class="pur_comma">, </span><a href="/tags/younicos">Younicos</a><span class="pur_comma">, </span><a href="/tags/eos-energy">Eos Energy</a><span class="pur_comma">, </span><a href="/tags/pacific-gas-electric">Pacific Gas &amp; Electric</a><span class="pur_comma">, </span><a href="/tags/california">California</a><span class="pur_comma">, </span><a href="/tags/electric-power-research-institute">Electric Power Research Institute</a><span class="pur_comma">, </span><a href="/tags/lawrence-berkeley-national-lab">Lawrence Berkeley National Lab</a><span class="pur_comma">, </span><a href="/tags/stem">Stem</a><span class="pur_comma">, </span><a href="/tags/etm-electromatic">ETM Electromatic</a><span class="pur_comma">, </span><a href="/tags/puget-sound">Puget Sound</a><span class="pur_comma">, </span><a href="/tags/renewable-energy">Renewable Energy</a><span class="pur_comma">, </span><a href="/tags/southern">Southern</a><span class="pur_comma">, </span><a href="/tags/algonquin">Algonquin</a><span class="pur_comma">, </span><a href="/tags/ikea">IKEA</a> </div>
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Sun, 01 Feb 2015 06:22:32 +0000meacott19016 at http://www.fortnightly.comTransactions (February 2015)http://www.fortnightly.com/fortnightly/2015/02/transactions-february-2015
<div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - February 2015</div></div></div><div class="field field-name-field-import-image field-type-image field-label-above"><div class="field-label">Image:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1502-TR.jpg" width="1050" height="1064" alt="" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p class="p1"><strong>ONEOK Partners</strong> completed its acquisition of assets from <strong>Chevron</strong> affiliates for about $800 million; <strong>Dominion Resources</strong> agreed to purchase <strong>Carolina Gas Transmission</strong> from <strong>SCANA Corp.</strong> for about $492.9 million; <strong>Entergy</strong> subsidiaries acquired the Union Power Station for $948 million; <strong>ALLETE Clean Energy</strong> acquired a 108-MW wind generation facility; <strong>Duke Energy Renewables</strong> acquired the Halifax Solar Power Project from <strong>Geenex</strong> and <strong>ET Solar Energy</strong>; <strong>Pattern Energy Group</strong> acquired the 200-MW Logan’s Gap Wind project in Texas for about $113 million; An affiliate of <strong>Starwood Energy Group Global</strong> agreed to acquire a 369-MW portfolio of three natural gas facilities from <strong>Lakeside Energy</strong>; <strong>NextEra Energy</strong> and <strong>Hawaiian Electric</strong> Industries agreed to combine.</p>
<p class="p1"> </p>
<p class="p1"> </p>
<p class="p1"> </p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/transactions">Transactions</a></li><li class="taxonomy-term-reference-1"><a href="/article-categories/mergers-acquisitions">Mergers &amp; Acquisitions</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-department field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Department: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/department/transactions">Transactions</a></li></ul></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
<div class="field-items">
<a href="/tags/chevron">Chevron</a><span class="pur_comma">, </span><a href="/tags/lakeside">Lakeside</a><span class="pur_comma">, </span><a href="/tags/union-power">Union Power</a><span class="pur_comma">, </span><a href="/tags/scana">SCANA</a><span class="pur_comma">, </span><a href="/tags/nrg">NRG</a><span class="pur_comma">, </span><a href="/tags/geenex">Geenex</a><span class="pur_comma">, </span><a href="/tags/et-solar">ET Solar</a><span class="pur_comma">, </span><a href="/tags/pattern-development">Pattern Development</a><span class="pur_comma">, </span><a href="/tags/nextera">NextEra</a><span class="pur_comma">, </span><a href="/tags/hawaiian-electric">Hawaiian Electric</a><span class="pur_comma">, </span><a href="/tags/cvx">CVX</a><span class="pur_comma">, </span><a href="/tags/scg">SCG</a><span class="pur_comma">, </span><a href="/tags/pegi">PEGI</a><span class="pur_comma">, </span><a href="/tags/nee">NEE</a><span class="pur_comma">, </span><a href="/tags/he">HE</a><span class="pur_comma">, </span><a href="/tags/oneok">Oneok</a><span class="pur_comma">, </span><a href="/tags/starwood">Starwood</a><span class="pur_comma">, </span><a href="/tags/entergy">Entergy</a><span class="pur_comma">, </span><a href="/tags/dominion">Dominion</a><span class="pur_comma">, </span><a href="/tags/allete">Allete</a><span class="pur_comma">, </span><a href="/tags/duke">Duke</a> </div>
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Sun, 01 Feb 2015 05:22:34 +0000meacott18976 at http://www.fortnightly.comFERC's Follyhttp://www.fortnightly.com/fortnightly/2014/09/fercs-folly
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p><span style="font-size: 13.3333339691162px; line-height: 20.0063056945801px;">Remand Order 745, fix the compensation scheme, but retain federal jurisdiction.</span></p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p><span style="font-size: 13.3333339691162px; line-height: 20.0063056945801px;">Robert L. Borlick</span></p>
</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p class="p1" style="font-size: 13.3333339691162px; line-height: 20.0063056945801px;"><strong>Robert L. Borlick</strong> is an independent energy consultant with more than 30 years of industry experience, both domestic and international. Since 2005 he has advised the Midwest Independent System Operator regarding the design of its demand response products. He has been a Senior Advisor with the Brattle Group and a Principle with Putnam, Hayes &amp; Bartlett and Hagler Bailly. He holds BS and MS degrees in electrical engineering from the Illinois Institute of Technology and the Ohio State University, and a MBA from Stanford University.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - September 2014</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Under the leadership of the now-former Chairman Jon Wellinghoff, the Federal Energy Regulatory Commission (FERC) issued Order 745 in March, 2011.<b><sup>1</sup></b> Order 745 mandates that economic demand response offered into an ISO-administered wholesale energy market must be paid the locational marginal price (LMP) at the location on the transmission grid where that energy would have been withdrawn to serve the demand response provider's load. In addition, Order 745 imposes a complex "net benefits test" that must be satisfied for providers to be eligible for compensation.<b><sup>2</sup></b></p>
<p>Order 745 has to be one of the worst orders the FERC has issued in its entire history.</p>
<p>In December, 2011, the Electric Power Supply Association (EPSA) and four other plaintiffs filed a petition asking the United States Court of Appeals for the District of Columbia Circuit to review the Order.<b><sup>3</sup></b> The plaintiffs' primary complaints were that the FERC lacks jurisdiction over demand response and that the compensation mandated by Order 745 unduly discriminates against generators selling into the wholesale energy markets by overcompensating the demand response providers.</p>
<p>A diverse group of energy economists filed an <i>Amicus Curare</i> brief with the court opposing Order 745.<b><sup>4</sup></b> As one of the <i>amici</i>, I agree with EPSA that the order overcompensates the providers of economic demand response, thereby producing energy market prices that are not economically efficient and that discriminate against wholesale generators. However, I do not agree that the FERC lacks jurisdiction over demand response products offered into the wholesale markets. I believe that FERC jurisdiction over these products is both justified and desirable.</p>
<p>On May 23, 2014 a three-judge panel of the D.C. Circuit struck down Order 745 on the grounds that the FERC lacks jurisdiction over demand response (DR), claiming that it is a retail market product subject exclusively to state regulation.<b><sup>5</sup></b> In July 2014, the FERC petitioned the D.C. Circuit for an <i>En Banc</i> review of the panel's decision.<b><sup>6</sup></b></p>
<h4>Demand Response: What is It?</h4>
<p>In reviewing the DC Circuit decision it seems clear that all of the panel judges were confused over what economic demand response actually is. Is it an energy sale? Is it a promise to not consume? No, it is neither. However, Judge Edwards' reference to "... a promise to forego consumption of electricity that would have been purchased in a retail market ..." comes remarkably close to describing the true nature of demand response.<b><sup>7</sup></b></p>
<p>As I described in a FERC filing and in several published articles, economic demand response is the sale of a retail customer's call option to purchase a fixed amount of electric energy at a strike price equal to that customer's fixed, pre-determined retail energy price. To be clear, the retail customer is indeed selling a promise to forego consumption of to a wholesale market participant.<b><sup>8</sup></b> The late Professor Alfred Kahn, who testified on behalf of the demand response coalition (and against me) also advanced this "call option" paradigm.<b><sup>9</sup></b> Furthermore, every energy economist I know agrees with this characterization. In stark contrast, the panel's two-judge majority claimed that "Demand response does not involve a sale and the resources "participate only by declining to act."<b><sup>10</sup></b> That is untrue. If nothing is sold why are we compensating the DR resource? In fact, call options are being sold. Sellers are not passively declining to act.</p>
<p>Anyone who trades options knows that the purchase or sale of an option is different from the purchase or sale of the underlying commodity (<i> i.e.</i> electric energy in this case). Consequently, the sale of demand response does not satisfy the bright-line definition set forth in Section 201 of the Federal Power Act (FPA), which explicitly makes reference to the "...regulation of transmission and sale of <i>electric energy</i>...."<b><sup>11</sup></b> [emphasis added].</p>
<p>Section 201 goes on to state as follows: "...such Federal regulation, however, to extend only to those matters which are not subject to regulation by the States...."<b><sup>12</sup></b> The U.S. Supreme Court concluded that this passage is ambiguous, referring to it as a "mere policy declaration."<b><sup>13</sup></b> Although demand response is not a sale of electric energy, it is a product created at the retail level; however, it does not necessarily follow that demand response is subject to the Section 201 prohibition.</p>
<p>When the FPA was enacted in 1935 wholesale markets were quite primitive. Centrally administered energy markets did not exist and virtually all utilities were vertically integrated, had very limited interconnections with other utilities, and were essentially dedicated to serving retail customers. The idea that these retail customers would become actively involved in wholesale markets was inconceivable in 1935, so how could how could Congress have intended the phrase, "... subject to regulation by the States" to apply to a product that did not even exist at that time? But if Congress had been clairvoyant it would have recognized that economic demand response constitutes a sale-for-resale, as defined in the FPA, therefore would be subject to FERC jurisdiction. The retail customer sells its call option to a wholesale market participant - who resells it to the ISO - who then resells it to one or more retail suppliers (as described later).</p>
<p>The panel's majority claimed that Order 745 effectively changes retail rates, stating, "The lure is change of the retail rate."<b><sup>14</sup></b> Not so - retail rates remain what they would have been if the economic demand response had never existed. Put another way, the strike price of a call option is unchanged by the owner (<i>i.e.</i>, the retail customer) gaining access to an opportunity to sell the option. While such an opportunity may change the customer's consumption behavior, a change in behavior is not synonymous with a change in the retail price.</p>
<p>Some state retail regulators have "regulated" demand response by explicitly denying third party "aggregators of retail customers" (ARCs) access to their jurisdictional retail customers.<b><sup>15</sup></b> Whether they are legally empowered to do so is a matter of state utility law. Absent such statutory language, retail regulators lack the authority to ban ARC participation - except as provided for by the FERC.</p>
<p>FERC Order 719A prohibits ISOs from accepting economic demand response offers from ARCs "... where the relevant retail electricity regulatory authority prohibits such demand response... or ...unless the retail electric regulatory authority permits...such customers' demand response to be bid into organized markets by an aggregator of retail customers."<b><sup>16</sup></b> Thus, the FERC has empowered retail authorities to regulate demand response indirectly. In light of this, how can anyone reasonably argue that FERC Order 745 infringes on the authority of retail regulators who voluntarily allow economic demand response to participate in wholesale energy markets?</p>
<p>If Section 201 of the FPA does not prohibit FERC from regulating demand response offered into the wholesale markets, then Section 206 authorizes the FERC to regulate prices that ISOs pay for demand response.</p>
<p>Specifically, Section 206 states:</p>
<p>Whenever the Commission, after a hearing had upon its own motion ... shall find that any rate ... or that any rule, regulation, practice, or contract affecting such rate... is unjust, unreasonable, unduly discriminatory or preferential, the Commission shall determine the just and reasonable rate, ... practice, or contract to be thereafter observed and in force, and shall fix the same by order.<b><sup>17</sup></b></p>
<p>Lastly, in <i>Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.,</i> the Supreme Court concluded:</p>
<p>When a challenge to an agency construction of a statutory provision, fairly conceptualized, really centers on the wisdom of the agency's policy, rather than whether it is a reasonable choice within a gap left open by Congress, the challenge must fail. In such a case, federal judges - who have no constituency - have a duty to respect legitimate policy choices made by those who do.<b><sup>18</sup></b></p>
<p>To be consistent with <i>Chevron v. NRDC,</i> the D.C. Circuit should defer to the FERC regarding its jurisdiction over demand response offered into the wholesale markets.</p>
<h4>Compensation: How Much?</h4>
<p>The second major issue in EPSA's challenge is the appropriate level of compensation. I agree with EPSA - the rates prescribed for economic demand response are not just and reasonable because ISOs are forced to incur twice as much cost to procure demand response energy as to procure the equivalent energy from generators. In addition, Order 745 imposes a complex "net benefits test" whose sole purpose is to manipulate wholesale market prices to favor wholesale buyers (<i>i.e.</i>, the retail suppliers) at the expense of wholesale generators, as explained below. This constitutes "undue discrimination," which the FPA prohibits.</p>
<p><b>Paying Twice for Energy.</b> One function of an ISO is to schedule the amount of energy that generators inject into the power system (including transmission losses) such that it closely matches the amount of energy that wholesale buyers contemporaneously withdraw from it. This requires the ISO to continuously adjust the output of generators and flexible loads that provide "regulation service." Then, at 5-minute intervals, the ISO readjusts the scheduled outputs of all generators and flexible loads to meet, on an economic ("least-cost") basis, the energy demand forecasted for the next 5-minute dispatch interval. We term this latter process "Security Constrained Economic Dispatch" (SCED). It's the "balancing service" addressed by Order 745.</p>
<p>The FERC asserts that a provider of a balancing service should receive the same compensation regardless of whether it is a generator or a DR resource.<b><sup>19</sup></b> While this is a sound principal, Order 745 goes off the rails by myopically assuming that when the ISO pays a DR resource to reduce load, the compensation should equal the payment made to a generator for an equal increase in output. But this is not so. Why? Because when a DR resource reduces its load, the retail supplier that serves the resource avoids having to buy the energy not consumed, thereby causing the ISO to lose that sales revenue. In contrast, no such revenue loss occurs when the ISO buys energy from a generator. Thus, in effect, the ISO incurs twice the cost for the energy released by a load reduction than the ISO would have incurred by buying that same amount of energy from a generator. How can incurring <i>twice</i> the cost for a service that is available from another type of resource at <i>one times</i> the cost be considered equal compensation? It cannot.</p>
<p>The discriminatory nature of Order 745 becomes even more obvious when examining what happens when the DR resource is a large industrial customer that buys energy directly from the wholesale spot market and also owns on-site generation. In this case, when the market price is below the variable cost of running its own generators, the customer buys its full requirement from the market; conversely, when the market price is above the variable cost of one of its generators, it runs that generator. By running on-site generation, in lieu of reducing its electricity consumption, the customer's generated energy effectively gets compensated at prices equal to twice the wholesale market prices - once through the ISO's direct payment for "demand response" and again through the customer's savings from its reduced energy purchases.<b><sup>20</sup></b> For comparison, a generator selling into the wholesale market would only be paid the wholesale market price once for delivering energy.<b><sup>21</sup></b> Thus, Order 745 mandates grossly unequal compensation between two generators producing the same product based on where the generator connects to the power system.</p>
<p><b>Unfair Recovery of Lost Revenues.</b> As stated earlier, Order 745 causes ISOs to suffer revenue shortfalls when purchasing balancing service from DRRs, but not when purchasing the service from generators. The FERC lawyers attempted to obfuscate this asymmetry by claiming it is an artifact of the "...reduction in billing units ..." a characterization concocted to convert the ISO revenue shortfall into a legitimate "cost" of doing business.<b><sup>22</sup></b> After synthesizing this "cost" the FERC then insisted that it be recovered in accordance with its established cost allocation principle.<b><sup>23</sup></b> But if Order 745 had not artificially created the "cost" there would be no "cost" to recover! The more one contemplates this conundrum, the more it looks like something imagined by Lewis Carroll.<b><sup>24</sup></b></p>
<p>Order 745 goes on to claim that "Allocating the costs...proportionally to all entities that purchase from the relevant energy market...will reasonably allocate the costs...to those who benefit from the lower prices produced by dispatching demand response."<b><sup>25</sup></b> Untrue. Even if the ISO's revenue shortfall were a real cost, rather than a contrived one, the FERC's cost recovery scheme would be flawed because it ignores the substantial windfall gains of the retail suppliers serving the DR resources that produced the reduction in load. These windfall gains occur because such a retail supplier avoids having to purchase the energy curtailed by its own retail customer (the DRR) at the market price (LMP) and reselling it to the customer at the lower retail tariff energy price (referred to as "G" in Order 745) thereby avoiding a loss equal to LMP - G. Recovering the ISO's lost revenue by uniformly allocating it to wholesale buyers in proportion to the amounts of energy they purchase turns a blind eye to these windfall gains. Several interveners pointed out this flaw but the FERC summarily dismissed their comments, claiming that "Bifurcated assignment of costs to the LSE and to others appears to represent an arbitrary division of cost responsibility without regard to the degree to which each receives benefits."<b><sup>26</sup></b> What is arbitrary about a simple calculation of the sum, LMP - G?</p>
<p>The FERC appears to have had two motives for "socializing" the lost revenue recovery. Firstly, socializing the recovery recruits the support of those retail suppliers enjoying windfall gains. Secondly, it makes it very difficult for regulators with jurisdictional retail customers served through an ISO operating in more than one state, to back out the uneconomic compensation components (<i> i.e.</i>, the G payments) and rebate them to the retail suppliers that serve the respective DR resources. That is because regulators that do not recoup the G payments made to their jurisdictional customers can shift those overpayments onto the retail customers in the other states. This is a classic case of the "tragedy of the commons" which the FERC has created.</p>
<p><b>Implicit Price Manipulation.</b> One of FERC's articulated objectives is to depress wholesale energy prices to the maximum degree, which is why it imposed the net benefits test on the ISOs. This test is designed to prevent demand response from over-responding past the point where wholesale market prices are minimized. Such over-response in any hour will increase the market price from this minimum level if the total payments to DR resources in that hour exceed the collective savings across the market from the induced market price reduction.</p>
<p>The very existence of the net benefits test is <i>prima facie</i> evidence - the "smoking gun" - that the FERC purposely set out to manipulate wholesale market prices by suppressing demand, rather than allowing those prices to be set through the normal interaction of market forces. The FERC consciously did this to benefit one class of market participants (the wholesale buyers) at the expense of another class of market participants (the wholesale generators). It is ironic that an agency, which aggressively prosecutes wholesale generators for price manipulation, is itself engaging in price manipulation. Surely this conflicts with the spirit, if not the letter, of the FPA and U.S. antitrust law.</p>
<h4>Reversing the Damage</h4>
<p>There are two basic ways to eliminate Order 745's discriminatory compensation:</p>
<p>• Allow ISOs to "reconstitute" the loads of the retail suppliers serving DR resources, or</p>
<p>• Allow ISOs to pay prices to DR resources equal to LMP-G, for their load reductions.</p>
<p><b>Reconstituting Load.</b> The simplest and most elegant way to eliminate Order 745's discriminatory double compensation is for the ISO to bill its payments to each DR resource back to the retail supplier serving that resource: <i> i.e.</i>, to "reconstitute" for settlement purposes, each retail supplier's wholesale load back to what it would have been without the load curtailments achieved by the DR resource. The California ISO implemented this scheme, which the FERC approved prior to issuing Order 745.<b><sup>27</sup></b> The Midwest ISO also proposed load reconstitution in comments submitted to the FERC.<b><sup>28</sup></b></p>
<p>Although load reconstitution would eliminate double compensation at the wholesale level, by itself it would not produce economically efficient outcomes. The economically efficient compensation level for a DR resource is LMP, including the retail bill savings (<i>i.e.</i> "G") that the DR resource will realize. Thus, if the ISO pays a DR resource a price equal to LMP for its load reduction, the resource actually gains LMP + G. Unless the G is somehow recouped, the resource will be overcompensated and will have a perverse incentive to curtail its usage even when the value of the product the curtailed energy could have produced is greater than the cost of producing and delivering that energy to the DR resource. Alternatively, a DR resource with on-site generation will have a perverse incentive to run its own generator even when the cost of producing that energy is higher than the production cost of an available wholesale generator. Both of these actions are economically inefficient and harm the U.S. economy by reducing its productivity.</p>
<p>While load reconstitution alone does not produce economically efficient rates, it does allow retail regulators to put in place vehicles for recovering the excess compensation (the G) at the retail level and rebating it to the retail supplier serving the DR resource, thereby providing economically efficient price signals. In addition, it returns the retail supplier to the same financial position it would have been in if the demand response had not occurred.<b><sup>29</sup></b> There are various ways this can be done, such as what California had already implemented prior to Order 745 and what the Midwest ISO had proposed in its NOPR filing, but retail regulators would have the freedom to develop their own innovative solutions.</p>
<p><b>Setting Price at LMP - G.</b> The alternative to relying on retail regulators to recoup the excess compensation is for ISOs to pay prices equal to LMP - G for economic demand response. This solution has advantages and disadvantages. One advantage is that it preemptively ensures that DR resources are appropriately compensated without relying on retail regulators (whose actions of retail regulators are uncertain). The disadvantages are that it intrudes on the prerogatives of those same retail regulators and imposes administrative burdens on ISOs by requiring them to create and maintain extensive data bases of the retail tariffs of the DRRs selling demand response into their respective energy markets. After much thought, I do not support this alternative.</p>
<h4>FERC Jurisdiction: Essential</h4>
<p>If the FERC ultimately loses jurisdiction over economic demand response, retail suppliers could still offer a similar product into the wholesale markets.<b><sup>30</sup></b> In that case the retail suppliers would fulfill the role that ARCs do under Order 745 so, operationally, little would change. But for this to happen, the retail regulators would have to order the retail suppliers to implement programs that offer to buy the demand response call options of their respective customers. Are retail regulators willing to rise to this challenge? Order 745 exists solely because they failed to do so in the past.</p>
<p>A second way to adapt to the FERC's loss of jurisdiction would be for retail regulators to replace existing fixed-rate retail tariffs with ones that incorporate dynamic prices indexed to spot wholesale market prices. Although a logical step, this is a heavy lift for the retail regulators because of consumer opposition and the associated political pressures.</p>
<p>Setting aside economic demand response, there are other, more serious consequences of FERC's loss of jurisdiction if it extends to other demand response products: <i> i.e.</i>, those that provide ISOs with ancillary services and the equivalent of generating capacity. Although the D.C. Circuit decision did not address these types of demand response, one of the owners of unregulated generation has already attempted to get demand resource disqualified from PJM's annual capacity auctions.<b><sup>31</sup></b></p>
<p>In light of all these argument, I sincerely hope that the <i>en banc</i> review takes place and that it finds that the FERC has jurisdiction over economic demand response. At the same time, I hope the court recognizes the discriminatory nature of the compensation mandated by Order 745 and remands that portion of the order back to the FERC. Notably, the FERC petitioned the court to review only the jurisdictional issue, presumably to wall off Order 745's discriminatory price manipulation from the eyes of the full court - or maybe (hopefully) the Commission already has decided to revise the compensation scheme.<b><sup>32</sup></b></p>
<p>The composition of the Commission has substantially changed since the departure of former Chairman Wellinghoff. That should enable the FERC to bring a fresh, objective perspective to what constitutes just and reasonable rates for economic demand response. The harmful effects of Order 745's compensation scheme cannot be undone too soon.</p>
<p> </p>
<h4>Endnotes:</h4>
<p>1. <i>Demand Response Compensation in Organized Wholesale Energy Markets</i>, 134 FERC, §61,187, (2011). FERC Commissioner Philip Moeller, strongly opposed the Order 745 decision and wrote a brilliant dissenting opinion. The order also sparked fractious disagreements among the FERC staff.</p>
<p>2. Economic demand response is a curtailment of energy that a retail customer would have otherwise consumed but for the compensation the customer received. The customer decides how much energy to offer for curtailment and at what price. There is no obligation to curtail unless the offer "clears" in one of the ISO's energy auctions.</p>
<p>3. UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA, <i>Electric Power Supply Association, Petitioner v. Federal Energy Regulatory Commission, Respondent,</i> Petition For Review, December 23, 2011.</p>
<p>4. <i>EPSA v. FERC</i>, Brief of Robert L. Borlick, Joseph Bowring, James Bushnell, And 18 Other Leading Economists As Amici Curiae In Support Of Petitioners<i>, </i>June 13, 2012.</p>
<p>5. <i>EPSA v. FERC</i>, On Petitions for Review of the Federal Energy Regulatory Commission, decided May 23, 2014.</p>
<p>6. <i>EPSA v. FERC</i>, On Petitions for Review of Orders of the Federal Energy Regulatory Commission, August 4, 2014.</p>
<p>7. <i>EPSA v. FERC</i>, Dissent of Judge Edwards, at 3.</p>
<p>8. Borlick, Robert L., Comments Of Robert L. Borlick, Energy Consultant, Demand Response Compensation, in Organized Wholesale Energy Markets, FERC Docket RM10-17-000, at 7.</p>
<p>Borlick, Pricing Negawatts - DR design flaws create perverse incentives, <i>Public Utilities Fortnightly</i>, August 2010, at 18.</p>
<p>Borlick, Paying for Demand-Side Response at the Wholesale Level: The Small Consumers' Perspective, <i>The Electricity Journal</i>, Vol. 24, Issue 9, November 2011, p. 13.</p>
<p>9. Kahn, Alfred E., Affidavit of Alfred E. Kahn, at 4, statement submitted on behalf of the Demand Response Supporters, filed in FERC Docket No.EL09-68-000, Sept. 16, 2009.</p>
<p>10. <i>Id. </i>4<i>, </i>at 7.</p>
<p>11. Federal Power Act, Section 201(a), 16 U.S.C . 824(a).</p>
<p>12. <i>Id</i>.</p>
<p>13. <i>New York v. FERC</i>, 535 U.S. 1, 22 (2002)</p>
<p>14. <i>Id. </i>4<i>, </i>at 11.</p>
<p>15. An ARC is a special-purpose wholesale market participant created to interface with the ISO on behalf of retail customers (DRRs) that are its clients. DRRs are not wholesale market participants thus cannot directly sell anything into the wholesale energy markets.</p>
<p>16. Wholesale Competition in Regions with Organized Electric Markets, 128 FERC, §61,059, (2009), at 116.</p>
<p>17. <i>Id. </i>12<i>, </i>Section 206(a).</p>
<p>18. <i>Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc</i>., 467 U.S. 837 (1984).</p>
<p>19. <i>Id. </i>1<i>, </i>at18.</p>
<p>20. FERC requires ISOs to treat a reduction in a wholesale customer's net load (<i>i.e.</i>, total energy consumption less that provided by onsite generation) as demand response eligible for compensation regardless of whether it results from an actual reduction in consumption or from an increase in onsite generation.</p>
<p>21. Onsite generation avoids distribution system losses; consequently, it deserves to be paid a higher price than the wholesale market price. However, distribution losses are <i>de minimus</i> for customers withdrawing energy directly from the transmission system so the price premium should be small - certainly far less than the market price.</p>
<p>22. <i>Id. </i>1<i>, </i>at 99.</p>
<p>23. <i>Id.</i> footnote 195.</p>
<p>24. Carroll, Lewis, 'When I use a word,' Humpty Dumpty said in rather a scornful tone, 'it means just what I choose it to mean - neither more nor less,' Through the Looking Glass (and What Alice Found There), 1871, p 45.</p>
<p>25. <i>Id. </i>1<i>, </i>at 100.</p>
<p>26. <i>Id. </i>1,<i> </i>at 101.</p>
<p>27. California Independent System Operator Corporation, Motion For Clarification, Request For Rehearing, And Request For Substantive Order Within 30 Days Of The California Independent System Operator Corporation, FERC Docket No. RM10-17-000, April 14, 2011, at 3-4.</p>
<p>28. Midwest Independent System Operator, Inc., Comments Of The Midwest Independent Transmission System Operator, Inc., FERC Docket No. RM10-17-000, May 13, 2010, at 5-6.</p>
<p>29. Advocates of demand response do not want retail suppliers to be indifferent; they want them to be biased in favor of maximizing demand response, regardless of what that may cost the general public.</p>
<p>30. One advantage of offering economic demand response to an ISO as a supply-equivalent resource (rather than a price-responsive load) is that the offer can include the DRR's operating parameters, such a "shutdown" costs, minimum down times, etc. That allows the ISO to treat the offer exactly like a generator's offer and to provide the DRR with "make-whole" payments so it is guaranteed not lose money if it follows the ISO's dispatch instructions.</p>
<p>31. FirstEnergy Service Company, Complaint Of FirstEnergy Service Company,<i> </i>FERC Docket No. EL14-55-000, May 23, 2014.</p>
<p>32. <i>Id. </i>4, at 15. Also see: FERC Letter to Mark Langer, Clerk, U.S. Court of Appeals for the District of Columbia Circuit, July 11, 2014.</p>
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Wed, 03 Sep 2014 22:34:29 +0000meacott17866 at http://www.fortnightly.comVendor Neutralhttp://www.fortnightly.com/fortnightly/2012/05/vendor-neutral
<div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Vendor Neutral</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - May 2012</div></div></div><div class="field field-name-field-import-image field-type-image field-label-above"><div class="field-label">Image:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1205-VEN-pic1.jpg" width="1080" height="719" alt="SNC-Lavalin and Aecon Construction are replacing pressure tubes and feeder pipes at the four Darlington nuclear reactors." title="SNC-Lavalin and Aecon Construction are replacing pressure tubes and feeder pipes at the four Darlington nuclear reactors." /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/1205-VEN-pic4.jpg" width="785" height="700" alt="CPUC directed California IOUs to negotiate contracts with Calpine’s Sutter plant." title="CPUC directed California IOUs to negotiate contracts with Calpine’s Sutter plant." /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1205-VEN-pic3.jpg" width="1075" height="719" alt="Puget Sound Energy began operating the 343-MW Lower Snake River wind project." title="Puget Sound Energy began operating the 343-MW Lower Snake River wind project." /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/1205-VEN-pic2.jpg" width="983" height="747" alt="IKEA commissioned Blink EV charging stations at a ninth store location in the Western U.S." title="IKEA commissioned Blink EV charging stations at a ninth store location in the Western U.S." /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><b>Entergy Louisiana</b> starts construction on gas-fired power project; <b>Virginia Commonwealth University</b> and <b>Dominion</b> partner on a test site for efficient energy technologies; <b>Burlington Electric Department</b> selects <b>Siemens</b> for meter data management platform; IKEA commissions four <b>Blink</b> electric vehicle charging stations; <b>Edison Mission Energy</b>, <b>TIAA-CREF</b> and <b>Cook Inlet Region Inc.</b> form partnership, and others.</p>
<h4>Generation</h4>
<p><b>Entergy Louisiana</b> started construction at a $721 million gas-fired power project in Westwego, La., per recent approval by the <b>Louisiana Public Service Commission</b>. Shaw Group is building Ninemile Unit 6, a 550-MW dual-fuel, combined-cycle unit at its existing Ninemile Point station, under an engineering, procurement and construction (EPC) contract. Entergy Louisiana will own 55 percent of the capacity and energy output of the unit, while Entergy Gulf States Louisiana and Entergy New Orleans, respectively, have contracted to purchase 25 percent and 20 percent of the capacity and output for the life of the units. The plant is expected to start up in the first part of 2015. </p>
<p><b>Calpine </b>agreed to supply <b>Western Farmers Electric Cooperative </b>(WFEC) with capacity and power from the Oneta Energy Center (OEC) from June 1, 2014, through 2035. Under the contract, WFEC initially will purchase 160 MW of Oneta’s capacity, an amount increasing to 280 MW from 2019 through 2035. Conditions of the contract include securing satisfactory transmission service.</p>
<p><b>Southern California Edison </b>(SCE) received a confirmatory action letter from the Nuclear Regulatory Commission’s (NRC), which outlines actions SCE must complete at the San Onofre nuclear generating station before seeking permission to restart Units 2 and 3. SCE recently submitted a letter to the NRC describing a series of actions it’s taking regarding steam generator issues at San Onofre. An NRC inspection team has been on site conducting inspections since March 19. Unit 3 has been shut down since January 31, when it was taken off line after station operators detected a leak in one of the unit’s steam generator tubes. Unit 2 was taken out of service for a planned outage on January 9.</p>
<p>The City of West Palm Beach, Florida, contracted <b>EMCOR Group</b> subsidiary <b>Poole &amp; Kent </b>to build a new power plant at its existing operating water treatment plant. The scope of work includes providing standby diesel generators and associated switchgear, fuel storage, and balance-of-plant systems.</p>
<p><b>Ontario Power Generation </b>(OPG) awarded a $600 million, two-phase contract to replace major components of the four reactors at Darlington nuclear generating station to a joint venture of <b>SNC-Lavalin Nuclear</b> and <b>Aecon Construction</b>. The project involves removing and replacing the 480 pressure tubes and calandria tubes and 960 feeder pipes for each of the station’s four reactors. The refurbishment is part of Ontario’s long-term energy plan, which will involve retrofits and replacements at numerous plants.</p>
<p><b>The California Public Utilities Commission </b>(CPUC) is taking action to keep the Sutter Energy Center operating through 2012. The CPUC directed PG&amp;E, Southern California Edison, and San SDG&amp;E to negotiate contracts with the 10 year-old Sutter plant in Yuba City, while the CPUC finalizes changes to its resource adequacy program. Calpine, owner of the plant, told the CPUC in November 2011 that it was planning on retiring the plant in 2012 due to a lack of a resource adequacy contract. The California Independent System Operator (ISO) predicted that the Sutter plant will be needed to help integrate renewable resources and phase out older, dirtier plants by 2017. </p>
<p><b>Puget Sound Energy</b> began operating the Lower Snake River wind facility, Washington’s largest wind farm. PSE began building the 343-MW project in May 2010 with lead contractor <b>Renewable Energy Systems </b>(RES) Americas and turbine manufacturer <b>Siemens Energy</b>.</p>
<p><b>Westinghouse</b> affirmed that it will seek <b>Department of Energy </b>(DOE) funding to support small modular reactor (SMR) technologies. According to a final opportunity announcement issued on March 22, the DOE plans to consider SMR applications that incorporate passive safety features and that can be licensed expeditiously, achieving a commercial operation date on a domestic site by 2022. Up to $452 million in funding is available.</p>
<p><b>DC Water</b> contracted <b>Pepco Energy Services</b> to design, build and operate a combined heat and power (CHP) plant at<b> </b>DC Water’s Blue Plains wastewater treatment plant. Pepco says the $81 million project will be the first in North America to use biogas from a water treatment facility. It will produce at least 14 MW of electric power to supply the Blue Plains facility with nearly 30 percent of its power demand. In addition to designing and building the CHP plant, Pepco will provide on-site operations and maintenance services valued at more than $89 million over the 15-year contract term. The overall project is valued at approximately $170 million. Construction will begin in August and is due to be completed in December 2014. </p>
<p><b>NRG Energy</b> contracted <b>First Solar</b> to build NRG’s 26 MW (AC) Avra Valley solar project near Tucson, Ariz. Electricity from the Avra Valley solar project will be sold to Tucson Electric Power under a 20-year power purchase agreement. Construction began at the end of March and First Solar expects to complete Avra Valley by the end of 2012.</p>
<p><b>Southwest Solar Technologies </b>signed a joint development agreement with <b>MaxQ Power Conversion LLC</b>, an affiliate of MaxQ Technology of Tempe, Ariz. Under the Agreement, the parties will cooperate to develop and manufacture Southwest Solar’s concentrating photovoltaic (CPV) module with MaxQ’s closed-loop liquid cooling system.<b> </b></p>
<h4>Smart Grid</h4>
<p><b>Alameda County</b> and <b>Chevron Energy Solutions</b> joined federal, state and local officials to unveil a microgrid that enables the county’s Santa Rita Jail to sustain power should its connection to the utility grid be interrupted. The $11.7 million project provides backup power and is expected to save the county about $100,000 a year in energy costs. The facility requires 3 MW of electricity to maintain daily operations and ensure the safety of the inmates and staff. The self-sustaining microgrid integrates several renewable energy projects implemented at the jail, including solar photovoltaic panels, a 1 MW fuel-cell cogeneration plant, and wind turbines, along with a 2 MW advanced energy storage system. Chevron built the project, which was funded in part by the U.S. Department of Energy, the California Energy Commission (CEC), and the California Public Utilities Commission. The CEC provided nearly $2 million in funding for the project through its Public Interest Energy Research (PIER) program.</p>
<p><b>Virginia Commonwealth University</b> and <b>Dominion</b> partnered to use the VCU School of Engineering’s West Hall as a five-year test site for efficient energy technologies and research as a microgrid project. Dominion experts, VCU engineering faculty and facilities management personnel, and third-party products and services providers will work together to implement continuous, real-time energy adjustments to the building, lights and equipment. It’s expected to reduce energy costs by $20,000, or 4 percent, annually. VCU and Dominion will split the $500,000 cost of the project, which includes installing hardware, control systems, and solar panels, to enable both parties to gather voltage data and analyze energy volume, timing, and emissions, and to establish energy usage trends and equipment performance.</p>
<h4>Metering</h4>
<p><b>Burlington Electric Department</b>, a municipal department of the City of Burlington, Vt., selected <b>Siemens</b> to implement an eMeter EnergyIP meter data management (MDM) platform. BED and several other Vermont utilities worked together with the state of Vermont to secure smart grid investment grant funding through the <i>American Recovery and Reinvestment Act</i> (ARRA). The scoping phase of the Burlington project began in mid-2011, and the second phase will include meter-to-cash functionality, advanced billing functionality, and operational improvements through reduced truck rolls and better outage management. In the future Burlington plans to implement the eMeter EnergyEngage consumer web portal and new energy efficiency programs.</p>
<p><b>Consumers Energy</b> selected a team of vendors and service providers to implement an advanced metering system for its 1.8 million electric customers in Michigan. <b>GE Energy</b> will provide metering hardware; <b>SmartSynch</b> will provide a celluar-based smart grid platform; <b>Grid Net</b> will provide networking and metering software; <b>Qualcomm</b> will provide mobile broadband chipsets; and <b>Verizon Wireless</b> will provide the communications network. Meter installation is scheduled to begin in Muskegon County in August 2012 with installation phases continuing through 2019.</p>
<h4>EVs &amp; Storage</h4>
<p>The<b> California Public Utilities Commission</b> and <b>NRG Energy</b> entered an agreement for NRG to build a comprehensive electric vehicle (EV) charging network in California, investing about $100 million over the next four years. The fee-based charging network will consist of at least 200 publicly available fast-charging stations—installed in the San Francisco Bay area, the San Joaquin Valley, the Los Angeles Basin, and San Diego County—with chargers that can add 50 miles of range in less than 15 minutes of charging. NRG also will provide the wiring for at least 10,000 individual charging stations located at homes, offices, multifamily communities, schools, and hospitals across the state. The agreement, pending approvals and finalization, resolves outstanding litigation arising from a long-term electricity contract entered more than a decade ago by a subsidiary of Dynegy, then a co-owner with NRG of the portfolio of power generating plants now owned by NRG in California.</p>
<p><b>EV Connect</b> helped the City of <b>Sacramento</b> increase its modern EV charging facilities and moved the state capital toward compliance with the state’s clean-car mandate, requiring one of every seven new cars sold in the state in 2025 to be a zero-emission vehicle. In addition, EV Connect has been deploying residential charge stations for new EV owners in the Sacramento area who took advantage of rebates and other incentives offered by the state. The company expects to do more work getting property owners EV ready, as automakers begin selling more electric and plug-in hybrid vehicles in California in order to reach the state’s 15.4 percent goal.</p>
<p><b>IKEA</b> commissioned four <b>Blink</b> electric vehicle charging stations at its Tempe, Ariz., store as part of its partnership with <b>ECOtality</b>. This initiative represents the ninth such project for IKEA in the United States, with the eight other locations also in the Western U.S. ECOtality is the project manager of the EV Project, a public-private partnership funded in part by an ARRA grant, to provide infrastructure to support the deployment of EVs.</p>
<h4>Transactions</h4>
<p><b>Exelon </b>and <b>Constellation Energy</b> completed their merger, effective March 12. The merger makes Chicago-based Exelon the largest investor owned utility in the United States, serving a total load of about 164 TWh per year, across 1 million residential and 100,000 commercial, industrial, and public sector customers. Exelon has operations and business activities in 47 states, the District of Columbia, and Canada. The company also has one of the nation’s largest power generation fleets, with approximately 35,000 MW of owned power generation, including more than 19,000 MW of nuclear power—which makes it the largest nuclear generator in the United States.</p>
<p><b>American Electric Power</b> and its unregulated subsidiary <b>AEP Retail Energy</b> acquired <b>BlueStar Energy Holdings </b>and its independent retail electric supplier BlueStar Energy Solutions. Chicago-based BlueStar supplies retail customers in Ohio, Illinois, and other deregulated electricity markets, and provides energy solutions, including demand response and energy efficiency services, nationwide. The company has been operating since 2002 and has more than 23,000 customer accounts.</p>
<p><b>NextEra Energy Resources</b> acquired two solar photovoltaic (PV) projects totaling 40 MW (AC) in St. Clair, Ontario, from <b>First Solar</b>. The projects began commercial operation in February 2012. The power is being sold to the Ontario Power Authority via long-term contracts under its renewable energy standard offer program.</p>
<p><b>Sumitomo Corp.</b> became a 50-50 equity partner in two large-scale wind farms that <b>Duke Energy Renewables</b> is building in Kansas. Sumitomo is buying a 50 percent stake in the 131-MW Cimarron II Windpower Project in Gray County, and the 168-MW Ironwood Windpower Project in Ford County. The projects are under construction and are expected to start operating later this year. Duke Energy Renewables will operate and maintain the projects. In addition, the companies are exploring opportunities to finance construction and operations. Both projects have 20-year contracts in place to sell output; <b>Kansas City Power &amp; Light</b> will purchase electricity and associated renewable energy credits (RECs) from Cimarron II and <b>Westar Energy</b> will buy all the power and RECs produced by the Ironwood wind farm. </p>
<p><b>Edison Mission Energy</b>, <b>TIAA-CREF</b>, and<b> Cook Inlet Region Inc. </b>formed<b> Capistrano Wind Partners</b>, a partnership to support and fund wind energy in North America, specifically by acquiring wind projects from <b>Edison Mission Group</b> (EMG). EMG companies currently own and operate a portfolio of 31 wind projects in commercial operation or under construction in 11 states with a generating capacity of nearly 2,000 MW. All wind projects in the Capistrano portfolio are expected to have long-term power sales agreements in place with electric utilities and will be operational at the time of investment. EMG will manage and retain an equity interest. Initial projects in the portfolio include the 61-MW Mountain Wind I and 80-MW Mountain Wind II projects, both located in Wyoming, as well as the 150-MW Cedro Hill project in Texas. Projects to be acquired when they become operational include the 42-MW Crofton Bluffs project and the 80-MW Broken Bow project, both under construction in Nebraska. Capistrano plans to acquire additional projects from EMG in the future, eventually up to seven projects totaling 500 MW. TIAA-CREF and CIRI committed $460 million of capital to the partnership, which includes an up-front investment of $238 million to acquire the first three operating wind projects.</p>
<p><b>Algonquin Power Co.</b>, Algonquin Power &amp; Utilities Corp’s renewable power generation subsidiary, agreed to acquire a 480-MW portfolio of four wind power projects in the United States from <b>Gamesa Corporación Tecnológica, S.A.</b> for $888 million. The portfolio consists of four facilities, Minonk (200 MW), Senate (150 MW), Pocahontas Prairie (80 MW) and Sandy Ridge (50 MW) located in the states of Illinois, Texas, Iowa and Pennsylvania, respectively. Pocahontas Prairie and Sandy Ridge began operating in February 2012, and Senate and Minonk are in construction with startup anticipated in late 2012. The projects are comprised of 240 Gamesa G9X-2.0 MW wind turbines. Gamesa is contracted to provide operations, warranty, and maintenance services for the wind turbines and balance of plant facilities for 20 years.</p>
<p><b>First Wind</b> obtained $236 million in financing for its 69 MW Kawailoa wind project on Kamehameha Schools’ Kawailoa Plantation lands on Oahu’s north shore. The project obtained a $220 million non-recourse construction and term loan and $16 million in letters of credit. <b>Union Bank</b> served as administrative agent and joint lead arranger, along with Bayern LB, Rabobank, and Siemens Financial Services. CIBC and CoBank also participated in the financing. Early construction work began in December 2011 and is expected to be completed by the end of 2012. Major construction work, including delivery and erection of turbines, is expected to begin this summer. First Wind says that once complete, the project will be the largest wind energy facility in Hawaii.</p>
<h4>Transmission</h4>
<p><b>ITC Transmission</b> selected <b>Quanta Services </b>Michigan<b> </b>subsidiary Iron Mountain to build the first segment of the Thumb Loop high-voltage transmission line. Phase 1 of the double-circuit, 345,000-volt (345 kV) line will extend about 62 miles from the site of the new Bauer substation in Tuscola County, to the new Rapson substation in Huron County in the state’s Thumb region. Line construction began in early April and will continue into 2013, with crews drilling pole foundations, installing steel monopole and lattice structures, and stringing conductors. ITC has negotiated easement agreements and established access points for equipment and materials along a 200-foot-wide transmission corridor.</p>
<p><b>Western Electricity Coordinating Council </b>(WECC) contracted <b>Siemens Power Technologies International </b>(PTI) to deliver WECC’s Base Case Coordination System (BCCS) planning tool. Based on Siemens PTI’s Model on Demand software product, the BCCS will improve the collection and compilation of data WECC uses to build its transmission system study models. Siemens says a centralized data base within the BCCS system will ensure model data consistency and data accuracy, and will provide tracking and data logging to comply with North American Electric Reliability Corp. (NERC) standards. The project is scheduled for completion in December 2012. </p>
<h4>People</h4>
<p><b>SoloPower</b> elected <b>General Wesley K. Clark </b>(ret.), to the company’s board of directors as an independent director.</p>
<p><b>Westinghouse </b>appointed <b>James A. Noyes</b> as v.p. of installation and modification services, nuclear services. Most recently, Noyes was v.p. of marketing and sales for the company’s Asia region.</p>
<p><b>SunPower </b>named <b>Charles D. Boynton</b> v.p. and CFO of the company. Prior to joining SunPower, Boynton was CFO for ServiceSource International.</p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/generation-markets">Generation &amp; Markets</a></li><li class="taxonomy-term-reference-1"><a href="/article-categories/td-grid">T&amp;D Grid</a></li><li class="taxonomy-term-reference-2"><a href="/article-categories/finance">Finance</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field 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<a href="/tags/aep">AEP</a><span class="pur_comma">, </span><a href="/tags/american-electric-power">American Electric Power</a><span class="pur_comma">, </span><a href="/tags/american-recovery-and-reinvestment-act">American Recovery and Reinvestment Act</a><span class="pur_comma">, </span><a href="/tags/arra">ARRA</a><span class="pur_comma">, </span><a href="/tags/bc">BC</a><span class="pur_comma">, </span><a href="/tags/blink">Blink</a><span class="pur_comma">, </span><a href="/tags/bluestar-energy-holdings">BlueStar Energy Holdings</a><span class="pur_comma">, </span><a href="/tags/bluestar-energy-solutions">BlueStar Energy Solutions</a><span class="pur_comma">, </span><a href="/tags/california-energy-commission">California Energy Commission</a><span class="pur_comma">, </span><a href="/tags/california-independent-system-operator">California Independent System Operator</a><span class="pur_comma">, </span><a href="/tags/california-public-utilities-commission">California Public Utilities Commission</a><span class="pur_comma">, </span><a href="/tags/calpine">Calpine</a><span class="pur_comma">, </span><a href="/tags/ccs">CCS</a><span class="pur_comma">, </span><a href="/tags/cec">CEC</a><span class="pur_comma">, </span><a href="/tags/chevron">Chevron</a><span class="pur_comma">, </span><a href="/tags/cobank">CoBank</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/constellat">Constellat</a><span class="pur_comma">, </span><a href="/tags/constellation">Constellation</a><span class="pur_comma">, </span><a href="/tags/constellation-energy">Constellation Energy</a><span class="pur_comma">, </span><a href="/tags/consumers-energy">Consumers Energy</a><span class="pur_comma">, </span><a href="/tags/cpuc">CPUC</a><span class="pur_comma">, </span><a href="/tags/cpv">CPV</a><span class="pur_comma">, </span><a href="/tags/dc">DC</a><span class="pur_comma">, </span><a href="/tags/department-energy">Department of Energy</a><span class="pur_comma">, </span><a href="/tags/dg">DG</a><span class="pur_comma">, </span><a href="/tags/doe">DOE</a><span class="pur_comma">, </span><a href="/tags/dominion">Dominion</a><span class="pur_comma">, </span><a href="/tags/duke-energy">Duke Energy</a><span class="pur_comma">, </span><a href="/tags/duke-energy-renewables">Duke Energy Renewables</a><span class="pur_comma">, </span><a href="/tags/dynegy">Dynegy</a><span class="pur_comma">, </span><a href="/tags/ecotality">ECOtality</a><span class="pur_comma">, </span><a href="/tags/edison-mission-energy">Edison Mission Energy</a><span class="pur_comma">, </span><a href="/tags/emcor-group">EMCOR Group</a><span class="pur_comma">, </span><a href="/tags/emeter">eMeter</a><span class="pur_comma">, </span><a href="/tags/entergy">Entergy</a><span class="pur_comma">, </span><a href="/tags/entergy-louisiana">Entergy Louisiana</a><span class="pur_comma">, </span><a href="/tags/entergy-new-orleans">Entergy New Orleans</a><span class="pur_comma">, </span><a href="/tags/epc">EPC</a><span class="pur_comma">, </span><a href="/tags/ev">EV</a><span class="pur_comma">, </span><a href="/tags/ev-connect">EV Connect</a><span class="pur_comma">, </span><a href="/tags/evs">EVs</a><span class="pur_comma">, </span><a href="/tags/exelon">Exelon</a><span class="pur_comma">, </span><a href="/tags/first-solar">First Solar</a><span class="pur_comma">, </span><a href="/tags/first-wind">First Wind</a><span class="pur_comma">, </span><a href="/tags/ford">Ford</a><span class="pur_comma">, </span><a href="/tags/ge">GE</a><span class="pur_comma">, </span><a href="/tags/iso">ISO</a><span class="pur_comma">, </span><a href="/tags/it">IT</a><span class="pur_comma">, </span><a href="/tags/itc">ITC</a><span class="pur_comma">, </span><a href="/tags/mdm">MDM</a><span class="pur_comma">, </span><a href="/tags/nerc">NERC</a><span class="pur_comma">, </span><a href="/tags/nextera">NextEra</a><span class="pur_comma">, </span><a href="/tags/nextera-energy">NextEra Energy</a><span class="pur_comma">, </span><a href="/tags/nextera-energy-resources">NextEra Energy Resources</a><span class="pur_comma">, </span><a href="/tags/north-american-electric-reliability-corp-0">North American Electric Reliability Corp.</a><span class="pur_comma">, </span><a href="/tags/nrc">NRC</a><span class="pur_comma">, </span><a href="/tags/nrg">NRG</a><span class="pur_comma">, </span><a href="/tags/nrg-energy">NRG Energy</a><span class="pur_comma">, </span><a href="/tags/nuclear">Nuclear</a><span class="pur_comma">, </span><a href="/tags/nuclear-regulatory-commission">Nuclear Regulatory Commission</a><span class="pur_comma">, </span><a href="/tags/pepco-energy-services">Pepco Energy Services</a><span class="pur_comma">, </span><a href="/tags/puget-sound-energy">Puget Sound Energy</a><span class="pur_comma">, </span><a href="/tags/pv">PV</a><span class="pur_comma">, </span><a href="/tags/quanta-services">Quanta Services</a><span class="pur_comma">, </span><a href="/tags/rec">REC</a><span class="pur_comma">, </span><a href="/tags/recovery">Recovery</a><span class="pur_comma">, </span><a href="/tags/reliability">Reliability</a><span class="pur_comma">, </span><a href="/tags/renewable">Renewable</a><span class="pur_comma">, </span><a href="/tags/renewable-energy">Renewable Energy</a><span class="pur_comma">, </span><a href="/tags/res">RES</a><span class="pur_comma">, </span><a href="/tags/san-diego-county">San Diego County</a><span class="pur_comma">, </span><a href="/tags/sce">SCE</a><span class="pur_comma">, </span><a href="/tags/shaw-group-0">Shaw Group</a><span class="pur_comma">, </span><a href="/tags/siemens">Siemens</a><span class="pur_comma">, </span><a href="/tags/siemens-energy">Siemens Energy</a><span class="pur_comma">, </span><a href="/tags/smartsynch">SmartSynch</a><span class="pur_comma">, </span><a href="/tags/smr">SMR</a><span class="pur_comma">, </span><a href="/tags/solar">Solar</a><span class="pur_comma">, </span><a href="/tags/solar-panels">solar panels</a><span class="pur_comma">, </span><a href="/tags/southern-california-edison">Southern California Edison</a><span class="pur_comma">, </span><a href="/tags/southwest-solar-technologies">Southwest Solar Technologies</a><span class="pur_comma">, </span><a href="/tags/storage">storage</a><span class="pur_comma">, </span><a href="/tags/sumitomo">Sumitomo</a><span class="pur_comma">, </span><a href="/tags/sumitomo-corp">Sumitomo Corp.</a><span class="pur_comma">, </span><a href="/tags/sunpower">SunPower</a><span class="pur_comma">, </span><a href="/tags/technology">Technology</a><span class="pur_comma">, </span><a href="/tags/transmission">Transmission</a><span class="pur_comma">, </span><a href="/tags/tucson-electric-power">Tucson Electric Power</a><span class="pur_comma">, </span><a href="/tags/us-department-energy">U.S. Department of Energy</a><span class="pur_comma">, </span><a href="/tags/union-bank-0">Union Bank</a><span class="pur_comma">, </span><a href="/tags/verizon">Verizon</a><span class="pur_comma">, </span><a href="/tags/verizon-wireless">Verizon Wireless</a><span class="pur_comma">, </span><a href="/tags/wecc">WECC</a><span class="pur_comma">, </span><a href="/tags/western-electricity-coordinating-council">Western Electricity Coordinating Council</a><span class="pur_comma">, </span><a href="/tags/wind">Wind</a> </div>
</div>
Tue, 01 May 2012 04:00:00 +0000puradmin13395 at http://www.fortnightly.comGoing, Going ...http://www.fortnightly.com/fortnightly/2011/12/going-going
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Clean energy jobs will be gone soon, if America fails to commit.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Edward Flippen</p>
</div></div></div><div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Op-Ed</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><b>Edward Flippen</b> is a partner (retired) with McGuireWoods LLP and a lecturer at Duke University’s Nicholas School of the Environment and at the University of Virginia School of Law. He is currently a visiting scholar at Queen Mary University of London. He acknowledges the contributions of McGuireWoods Associate Brett Breitschwerdt.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - December 2011</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>America needs an energy policy today that will bring together our best and brightest, harness the limitless capabilities of our research institutions, and invest whatever it takes to ensure America’s leadership in clean energy technologies. The result will be to create billion-dollar industries and millions of new jobs.</p>
<p>The 14 million Americans unemployed and 8.8 million under-employed feel left out of the American dream. The almost limitless opportunities available to the post-World War II generation simply aren’t there today. But there are opportunities. They might require re-training or relocating; and they might provide less pay or benefits. But, for sure, opportunities exist. But—and equally for sure—the people seeking those opportunities require help.</p>
<p>What better way to help them than by taking advantage of opportunities to create new energy jobs?</p>
<p>In the 2011 <i>World Energy Outlook</i>, the International Energy Agency estimates that between 2011 and 2035, roughly $38 trillion in energy infrastructure will be required to meet global demand.<sup>1</sup> Investments in the power sector alone will equal roughly $16.9 trillion to maintain current supply levels.<sup>2 </sup></p>
<p>Surely President Obama and Congress can develop a bipartisan plan leveraging both government spending and private investment for home-grown energy solutions that heads America down an R&amp;D path that eventually will produce more job-creating clean energy technologies. It’s fundamental that America must remain the land of innovation and opportunity when it comes to clean energy. But we can’t wait until new clean energy technologies arrive at our shores; we also can’t postpone domestic development, production, or manufacture of the entire spectrum of America’s energy resources.</p>
<p>America needs an energy policy today that will bring together our best and brightest, harness the limitless capabilities of our research institutions, and invest whatever it takes. The result will be the creation of billion-dollar industries, new technologies with applications heretofore unimaginable, and—critically important in today’s fragile economy—a million-plus new jobs.</p>
<h4>Falling Short of Independence</h4>
<p>Seven U.S. presidents have signed energy legislation to foster energy efficiencies, conservation, and, ultimately, energy independence. In 1946, President Truman signed the first Atomic Energy Act,<sup>3</sup> creating the Atomic Energy Commission. Then President Eisenhower signed the Atomic Energy Act of 1954,<sup>4</sup> opening the way for civilian nuclear power and the world’s first nuclear power plant in Shippingport, Pa., in 1957. In 1973, President Nixon launched Project Independence with the goal of achieving energy independence by 1980.<sup>5</sup> In 1975, President Ford moved the date for achieving energy independence to 1985 and signed the Energy Policy and Conservation Act,<sup>6</sup> mandating vehicle fuel economy standards and authorizing the creation of a strategic petroleum reserve. President Carter’s 1978 National Energy Act<sup>7</sup> was designed to reduce the use of fuels by industry; in 1980, he signed an Energy Security Act<sup>8</sup> promoting solar energy and other renewable energy sources. President George H.W. Bush signed the Energy Policy Act of 1992<sup>9</sup> to reduce U.S. dependence on foreign oil by requiring certain fleets to acquire alternative fuel vehicles capable of operating on non-petroleum fuels. Between 1993 and 2001, President Clinton announced initiatives to stabilize greenhouse gas emissions and increase the use of sustainable energy technology.<sup>10</sup> In 2005, President George W. Bush signed another Energy Policy Act<sup>11</sup> aimed at encouraging energy efficiency and conservation, promoting alternative and renewable energy, and promoting the expansion of nuclear energy. In 2007, President Bush signed the Energy Independence and Security Act,<sup>12</sup> which, among other things, increased automobile fuel economy standards and provided incentives for increased energy efficiency in public buildings and lighting. Finally, on Feb. 17, 2009, President Obama signed the American Reinvestment and Recovery Act,<sup>13</sup> a $787.2 billion economic stimulus package providing energy development incentives, tax incentives, direct grants, and financing assistance.</p>
<p>Notwithstanding the efforts of seven U.S. presidents, these policies have fallen far short of their laudable objectives. In the meantime, world energy consumption continues to grow, including a 5.6 percent increase in 2010 alone, which represents the largest increase since 1973.<sup>14</sup> The year 2010 was also significant as China, which increased its consumption by more than 11 percent, surpassing the U.S. as the world’s largest energy consumer.<sup>15</sup></p>
<p>By 2035, word energy consumption is estimated to increase by 53 percent over 2008 levels and China is projected to use 68 percent more energy than the United States by that year.<sup>16</sup> By 2020, the global clean energy market is expected to reach $2.3 trillion. First Solar, a major solar manufacturer headquartered in Tempe, Ariz., announced the largest solar project in the world in a joint venture with China Guangdong Nuclear (CGN) Solar Energy Development Co. Even as this investment by China in green technologies will ultimately be subsidized by taxpayers in the United States and other Western countries where it’s exported, China is moving forward in the development of new clean energy resources—in fact, investing nearly double what the U.S. invests in green technologies.</p>
<p>Another U.S. company, Chevron, is the largest producer of geothermal energy in the world; however, the company’s prominence is attributable mostly to its geothermal operations in Indonesia. Meanwhile, Iceland is the world’s largest exporter of geothermal technology and expertise, and India is developing cutting-edge wave technology with pending construction of a tidal power project. And Denmark continues to outpace the United States in installed offshore wind capacity, with nine offshore farms and more than 300 turbines.</p>
<p>Nothing less than a Sputnik response is required by the president and Congress to catapult the U.S. back to the forefront of the current race for clean energy technology and energy independence. Providing for U.S. energy security requires a Sputnik-like technology commitment—a national effort to develop technology that will provide America with energy independence while cleaning up the air, land and water for our children and their children, and ensuring energy for our national defense. And, importantly, a Sputnik commitment would provide the United States with millions of jobs.</p>
<p>A lack of commitment will still result in new investment and millions of jobs—just not in America.</p>
<h4>A Sputnik Moment</h4>
<p>President Kennedy’s goal to close any illusion of a space technology gap between the Soviet Union and U.S. was met with Neil Armstrong’s “one small step for [a] man; one giant leap for mankind.” Today, President Obama has established the goals of 80 percent of U.S. energy coming from clean generation sources by 2035 and closing the clean energy gap that exists between the U.S. and other countries like China. This is an admirable goal, but not if American workers aren’t at the forefront of developing and manufacturing the next clean energy resource.</p>
<p>America can be the innovator and leading exporter of clean energy technology in a $2.3 trillion market, or we can be a major importer. What we can’t be is an indifferent “porter.” The train is leaving the station full of future energy jobs. The destination should be the U.S. homeland, but it takes more than politicians’ speeches to create job opportunities. It requires hands-on action—a John Kennedy commitment, a Steve Jobs imagination, the force of Ronald Reagan and, above all, Americans helping Americans.</p>
<p> </p>
<h4>Endnotes:</h4>
<p>1. World Energy Outlook, 2011, (Executive Summary), p. 2, International Energy Agency.</p>
<p>2. World Energy Outlook, 2011, “Cumulative investment in energy infrastructure, 2011-2035.”</p>
<p>3. Atomic Energy Act of 1946, 60 Stat. 765 (1946) (current version at 42 U.S.C. § 2011 et seq.) (2006).</p>
<p>4. Atomic Energy Act of 1954, 68 Stat. 921 (1954) (current version at 42 U.S.C. § 2011 et seq.) (2006).</p>
<p>5. See <a href="http://www.energy.gov/about/timeline 1971-1980.htm" target="_blank">http://www.energy.gov/about/timeline 1971-1980.htm</a>, last visited July 22, 2009.</p>
<p>6. Energy Policy and Conservation Act, 94 Pub. L. No. 163, 89 Stat. 874 (1975) (current version at 42 U.S.C. § 6201 et seq.) (2006).</p>
<p>7. National Energy Act of 1978 comprised five separate statutes: the Public Utility Regulatory Policies Act of 1978, Pub. L. No. 95-617, 92 Stat. 3117 (1978) (16 U.S.C. §§ 796(17)-(18), 824a-3, 824i, 824k (2006); the Energy Tax Act of 1978, Pub. L. No. 95-618, 92 Stat. 3174 (1978 ); the National Energy Conservation Policy Act, Pub. L. No. 95-619, 92 Stat. 3206 (1978); the Powerplant and Industrial Fuel Use Act of 1978, Pub. L. No. 95-620, 92 Stat. 3289 (1978); and the Natural Gas Policy Act of 1978, Pub. L. No. 95-621, 92 Stat. 3351 (1978).</p>
<p>8. Energy Security Act of 1980, Pub. L. No. 96-294, 94 Stat. 718 (1980) (16 U.S.C. §§ 2705, 2708) (2006).</p>
<p>9. Energy Policy Act of 1992, Pub. L. No. 102-486, 106 Stat. 2776 (1992) (codified as amended in scattered sections of U.S.C.) (2006).</p>
<p>10. The Clinton Presidency: Protecting Our Environment and Public Health.</p>
<p>11. Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594 (2005) (codified as amended in scattered sections of U.S.C.) (2006).</p>
<p>12. Energy Independence and Security Act of 2007, Pub. L. No. 110-140, 121 Stat. 1492 (2007) (codified as amended in scattered sections of U.S.C.) (2006).</p>
<p>13. American Reinvestment and Recovery Act of 2009, Pub. L. No. 111-5, 123 Stat. 115 (2009).</p>
<p>14. BP Statistical Review of World Energy, at 1 (June 2011).</p>
<p>15. BP Statistical Review of World Energy, at 2 (June 2011).</p>
<p>16. EIA International Energy Outlook 2011, Press Release, Sept. 19, 2011.</p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/energy-policy-legislation">Energy Policy &amp; Legislation</a></li><li class="taxonomy-term-reference-1"><a href="/article-categories/talent-succession-planning">Talent &amp; Succession Planning</a></li><li class="taxonomy-term-reference-2"><a href="/article-categories/strategy-planning">Strategy &amp; Planning</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-department field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Department: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/department/op-ed">Op-Ed</a></li></ul></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
<div class="field-items">
<a href="/tags/american-reinvestment-and-recovery-act">American Reinvestment and Recovery Act</a><span class="pur_comma">, </span><a href="/tags/atomic-energy-act">Atomic Energy Act</a><span class="pur_comma">, </span><a href="/tags/chevron">Chevron</a><span class="pur_comma">, </span><a href="/tags/china">China</a><span class="pur_comma">, </span><a href="/tags/china-guangdong-nuclear">China Guangdong Nuclear</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/congress">Congress</a><span class="pur_comma">, </span><a href="/tags/conservation">Conservation</a><span class="pur_comma">, </span><a href="/tags/eia-0">EIA</a><span class="pur_comma">, </span><a href="/tags/energy-independence-and-security-act">Energy Independence and Security Act</a><span class="pur_comma">, </span><a href="/tags/energy-policy-act">Energy Policy Act</a><span class="pur_comma">, </span><a href="/tags/energy-policy-act-1992">Energy Policy Act of 1992</a><span class="pur_comma">, </span><a href="/tags/energy-policy-act-2005">Energy Policy Act of 2005</a><span class="pur_comma">, </span><a href="/tags/energy-policy-and-conservation-act">Energy Policy and Conservation Act</a><span class="pur_comma">, </span><a href="/tags/energy-security-act">Energy Security Act</a><span class="pur_comma">, </span><a href="/tags/first-solar">First Solar</a><span class="pur_comma">, </span><a href="/tags/ford">Ford</a><span class="pur_comma">, </span><a href="/tags/george-hw-bush">George H.W. Bush</a><span class="pur_comma">, </span><a href="/tags/george-w-bush">George W. Bush</a><span class="pur_comma">, </span><a href="/tags/international-energy-agency">International Energy Agency</a><span class="pur_comma">, </span><a href="/tags/national-energy-act">National Energy Act</a><span class="pur_comma">, </span><a href="/tags/national-energy-conservation-policy-act">National Energy Conservation Policy Act</a><span class="pur_comma">, </span><a href="/tags/nuclear">Nuclear</a><span class="pur_comma">, </span><a href="/tags/president-carter">President Carter</a><span class="pur_comma">, </span><a href="/tags/president-clinton">President Clinton</a><span class="pur_comma">, </span><a href="/tags/president-eisenhower">President Eisenhower</a><span class="pur_comma">, </span><a href="/tags/president-ford">President Ford</a><span class="pur_comma">, </span><a href="/tags/president-nixon">President Nixon</a><span class="pur_comma">, </span><a href="/tags/president-obama">President Obama</a><span class="pur_comma">, </span><a href="/tags/president-truman">President Truman</a><span class="pur_comma">, </span><a href="/tags/project-independence">Project Independence</a><span class="pur_comma">, </span><a href="/tags/public-utility-regulatory-policies-act">Public Utility Regulatory Policies Act</a><span class="pur_comma">, </span><a href="/tags/recovery">Recovery</a><span class="pur_comma">, </span><a href="/tags/security">Security</a><span class="pur_comma">, </span><a href="/tags/solar">Solar</a><span class="pur_comma">, </span><a href="/tags/solar-energy-development-co">Solar Energy Development Co.</a><span class="pur_comma">, </span><a href="/tags/world-energy-outlook">World Energy Outlook</a> </div>
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Thu, 01 Dec 2011 05:00:00 +0000puradmin13488 at http://www.fortnightly.comVendor Neutralhttp://www.fortnightly.com/fortnightly/2011/06/vendor-neutral
<div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Vendor Neutral</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - June 2011</div></div></div><div class="field field-name-field-import-image field-type-image field-label-above"><div class="field-label">Image:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1106-VENpic1.jpg" width="1200" height="800" alt="ABB is investing $90 million to build a new high-voltage cable factory in Huntersville, N.C." title="ABB is investing $90 million to build a new high-voltage cable factory in Huntersville, N.C." /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/1106-VENpic2.jpg" width="640" height="425" alt="Survalent Technology commissioned a new SCADA system for the Golden Spread Electric Cooperative Antelope Station. Antelope Station is a gas-fired power plant with 18 9-MW gensets capable of generating about 170 MW, allowing the plant to quickly respond to regional capacity requirements.The SCADA system includes Survalent’s open system applications." title="Survalent Technology commissioned a new SCADA system for the Golden Spread Electric Cooperative Antelope Station. Antelope Station is a gas-fired power plant with 18 9-MW gensets capable of generating about 170 MW, allowing the plant to quickly respond to regional capacity requirements.The SCADA system includes Survalent’s open system applications." /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1106-VENpic3.jpg" width="1008" height="692" alt="Dynamic Solar completed a 250-kW solar system in Philadelphia, Pa., for the Philadelphia Water Department. Dynamic Solar teamed with CETCO Contracting Services and Nucero Electric to design, engineer and install the 250-kW ground mounted system. The array is located at the Southeast Water Pollution Control Plant and is expected to generate approximately 330,000 kWh of solar electricity per year." title="Dynamic Solar completed a 250-kW solar system in Philadelphia, Pa., for the Philadelphia Water Department. Dynamic Solar teamed with CETCO Contracting Services and Nucero Electric to design, engineer and install the 250-kW ground mounted system. The array is located at the Southeast Water Pollution Control Plant and is expected to generate approximately 330,000 kWh of solar electricity per year." /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/1105-VENpic4.jpg" width="730" height="547" alt="Chevron Mining Inc. recently began operating a 1-MW concentrating solar photovoltaic (CPV) power plant at the tailing site of its molybdenum mine in Questa, N.M. The 20-acre facility includes 172 solar trackers. Kit Carson Electric Cooperative is buying the output under a power purchase agreement." title="Chevron Mining Inc. recently began operating a 1-MW concentrating solar photovoltaic (CPV) power plant at the tailing site of its molybdenum mine in Questa, N.M. The 20-acre facility includes 172 solar trackers. Kit Carson Electric Cooperative is buying the output under a power purchase agreement." /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1105-VENpic5.jpg" width="922" height="1143" alt="Caithness Energy and GE Energy Financial Services sold part of the 845-MW Shepherds Flat wind project to Google, ITOCHU and Sumitomo." title="Caithness Energy and GE Energy Financial Services sold part of the 845-MW Shepherds Flat wind project to Google, ITOCHU and Sumitomo." /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><h4>T&amp;D</h4>
<p><span class="boldred">ABB</span> broke ground for a new high-voltage cable factory in Huntersville, N.C. The new facility, located at the Commerce Station Business Park, will supply high-voltage and extra high-voltage transmission cables to carry electric power underground. ABB says the factory will produce “smart grid-compliant cables,” for use in both AC and DC applications. ABB is investing approximately $90 million in the new manufacturing facility, which is the newest addition to Charlotte’s Energy Hub economic development initiative.</p>
<p><span class="boldred">ABB</span> launched its latest generation 245-kV ELK-14 series of gas insulated switchgear (GIS). ABB says the footprint of this latest GIS product is 40 percent smaller than conventional designs and it uses 20 percent less SF6 gas compared to the previous generation, making it more environmentally friendly. The unit can be delivered as an assembled bay, fully tested and mounted on a frame, which ABB says reduces installation time. Control and protection equipment installed in the control cubicle directly at the bay also is intended to enable smart grid integration. The systems were designed for a rated voltage of 253 kV, with a maximum current rating of 3,150 amps.</p>
<p><span class="boldred">Duke Energy</span> and <span class="boldred">American Transmission Co.</span> (ATC) created the Duke-American Transmission Co. (DATC), a joint venture that will build, own and operate new electric transmission infrastructure in North America. The joint venture will operate as a transmission utility. As a result, it will be subject to the rules and regulations of the Federal Energy Regulatory Commission, MISO, PJM and various other independent system (grid) operators, as well as any states in which DATC develops projects. Per the structure of their new joint venture, Duke Energy and ATC may continue to develop transmission projects independently. DATC will own all of the transmission assets it builds and operates. Equity ownership of DATC will be split equally between Duke Energy and ATC.</p>
<p><span class="boldred">Tres Amigas</span> awarded a $200 million contract to <span class="boldred">Alstom Grid</span> to deliver high-voltage direct-current (HVDC) converter and automation technology for the first stage of the Tres Amigas SuperStation project in New Mexico. The project aims to interconnect America’s three primary electricity grids, the Eastern (Southwest Power Pool), Western (Western Electricity Coordinating Council) and Texas (Electric Reliability Council of Texas) networks. Under the contract, Alstom Grid will supply a 750-MW, 345-kV DC converter scheme. Engineering design for the transmission interconnection is underway, with construction scheduled to commence by 2012, and commercial operations expected in 2014.</p>
<h4>Environmental</h4>
<p><span class="boldred">American Electric Power</span> (AEP) installed <span class="boldred">GE</span>’s ABMet wastewater bioreactor system at the utility’s Mountaineer coal-fueled power plant in New Haven, W.Va. The proprietary biological treatment system uses a special molasses-based product as a nutrient for microbes that reduce selenium, a constituent found in many coal-fired power plant water emissions. GE’s ABMet technology utilizes special strains of common, non-pathogenic microbes that facilitate conversion of soluble selenium into elemental selenium, which is removed from the system during periodic backwashing. The microbes, which are fed the molasses-based nutrient, are seeded in a bed of activated carbon that acts as a growth medium for the microbes to create a biofilm. Selenium-laden wastewater passes through this bioreactor and a reduction reaction occurs. Other than the addition of the nutrient, GE says the system will be self-sustaining once it’s established. Selenium is an element found in coal that is not consumed in the combustion process and typically can be found in several of a plant’s post-combustion waste streams. AEP is installing GE’s system to allow its 1,300-MW Mountaineer generating station to comply with a new discharge limit for selenium. Construction of AEP’s treatment facility began in July 2010. The system is scheduled to become operational by the end of 2011.</p>
<p><span class="boldred">TÜV SÜD America</span> announced that the <span class="boldred">Massachusetts Department of Environmental Protection</span> (MassDEP) approved the Massachusetts-based company as a verification body to provide verification services for the Massachusetts Greenhouse Gas (GHG) Reporting Program. The Global Warming Solutions Act (GWSA) required MassDEP to promulgate mandatory GHG reporting regulations.</p>
<h4>Smart Grid</h4>
<p><span class="boldred">ABB</span> won orders from <span class="boldred">CenterPoint Energy</span> for the latest Service Suite mobile workforce management software from Ventyx and for the FocalPoint business intelligence solution from ABB’s latest acquisition, Obvient. These will be integrated into CenterPoint’s advanced distribution automation system, based on ABB’s Network Manager distribution management system (DMS).</p>
<p>The governing board of the public-private <span class="boldred">Smart Grid Interoperability Panel</span> (SGIP) voted in favor of a new smart grid standard and a set of guidelines. The documents address the need for wireless communications among grid-connected devices, as well as the ability to upgrade household electricity meters as the smart grid evolves. The SGIP identified “Guidelines for Assessing Wireless Communications for Smart Grid Applications” and “Meter Upgradeability Standard” as critical needs for realizing a modern power grid.</p>
<h4>Generation</h4>
<p><span class="boldred">Survalent Technology</span> commissioned a new SCADA system for the Golden Spread Electric Cooperative Antelope Station. Antelope Station is a gas-fired power plant with 18 9-MW gensets capable of generating about 170 MW, allowing the plant to quickly respond to regional capacity requirements.The SCADA system includes Survalent’s open system applications.</p>
<p><span class="boldred">Dynamic Solar</span> completed a 250-kW solar system in Philadelphia, Pa., for the Philadelphia Water Department. Dynamic Solar teamed with CETCO Contracting Services and Nucero Electric to design, engineer and install the 250-kW ground mounted system. The array is located at the Southeast Water Pollution Control Plant and is expected to generate approximately 330,000 kWh of solar electricity per year.</p>
<p><span class="boldred">Chevron Mining Inc.</span> recently began operating a 1-MW concentrating solar photovoltaic (CPV) power plant at the tailing site of its molybdenum mine in Questa, N.M. The 20-acre facility includes 172 solar trackers. Kit Carson Electric Cooperative is buying the output under a power purchase agreement.</p>
<p><span class="boldred">Dominion Virginia Power</span> is planning to convert three 63-MW power stations from using coal to biomass. The power stations in Altavista, Hopewell and Southampton County are identical and went into operation in 1992, providing peaking power supplies. When converted, they would generate 50 MW each, but operate as a base-load resource. The facilities will be fueled with logging waste. Pending approvals from the Virginia Department of Environmental Quality and the Virginia State Corporation Commission, the facilities could begin burning biomass in 2013.</p>
<p><span class="boldred">NextEra Energy Resources</span> entered a power purchase agreement with <span class="boldred">Google Energy</span> to purchase 100.8 MW of capacity from NextEra Energy Resources’ Minco II Wind Energy Center, currently under development in Grady and Caddo counties in Oklahoma. The project is comprised of 63 GE 1.6-MW wind turbines and is expected to be operational by the end of 2011. This is the second power purchase agreement for wind energy between the two companies. Google Energy also purchases 114 MW from NextEra Energy Resources’ Story II Wind Energy Center located in Story and Hardin counties in Iowa.</p>
<p><span class="boldred">Fotowatio Renewable Ventures</span> (FRV) closed financing and began construction on the 30-MW Webberville solar project, one of the largest solar PV systems in the United States. The project, located near Austin, Texas, is scheduled to be operational by year-end. <span class="boldred">Renewable Energy Systems Americas</span> (RES Americas) was selected to construct the project and provide operations and maintenance services for five years. Austin Energy will buy the plant’s output under a 25-year power purchase agreement. FRV partnered with Bayerische Landesbank (BayernLB), which underwrote the project construction debt. The project will use crystalline 270-Watt photovoltaic modules from Trina Solar.</p>
<p><span class="boldred">The Solar Electric Power Association</span> (SEPA) announced five utility groups have joined SEPA: American Municipal Power (AMP); City of Lake Worth, Fla.; Central Hudson Gas &amp; Electric (CH Energy Group); Greenwood Utilities Commission; South Mississippi Electric Power Association. SEPA says its utility membership now represents more than 95 percent of the nation’s installed solar capacity and 47 percent of all U.S. electric customers.</p>
<p><span class="boldred">Solar Power Partners</span> (SPP) and <span class="boldred">JCM Capital</span> have signed an agreement with <span class="boldred">Solar Power Network</span> (SPN), to provide full project financing for up to 20 MW of commercial-scale rooftop installations to be located throughout southwestern Ontario. The agreement follows the recent Solar Power Partners and JCM Capital announcement on the launch of their fund to develop, finance, own, and operate 200 MW of solar projects in Ontario. The SPN contract brings the current fund volume to 50 MW. SPP and JCM have already initiated 20 MW of projects that will start construction in 2011. The fund focuses on the installation of solar projects on large commercial and industrial buildings across Ontario, using the province’s feed-in-tariff program via solar PPAs with the Ontario Power Authority.</p>
<p><span class="boldred">Boeing</span> and <span class="boldred">South Carolina Electric &amp; Gas</span> (SCE&amp;G) created an energy partnership that will enable Boeing South Carolina to operate as a 100 percent renewable energy site. Renewable energy will be generated at the North Charleston site in part with thin-film solar laminate panels owned, installed and maintained by SCE&amp;G on the new Boeing 787 Final Assembly building roof. Under the arrangement, SCE&amp;G will install the solar generation system and dedicate the power from the system to the Boeing site. SCE&amp;G will then supplement the solar generated energy with power from its system resources, coupled with renewable energy certificates from its renewable generating facility, to meet all of Boeing’s energy requirements.</p>
<p><span class="boldred">Constellation Energy</span> and <span class="boldred">Holyoke Gas &amp; Electric Department (HG&amp;E)</span> are developing a new 4.5-MW solar installation that will generate electricity for Holyoke. Constellation Energy will build, own and maintain the system, and HG&amp;E will purchase the output under a 20-year PPA at a fixed cost that Constellation says is less than projected market rates. HG&amp;E’s solar power system will include 18,400 SolarWorld photovoltaic ground-mounted panels at two locations. The system is scheduled for commercial operation in summer 2011.</p>
<p><span class="boldred">Hartz Solar Hamilton</span>, a wholly-owned subsidiary of Hartz Mountain Industries, selected <span class="boldred">RMT Inc.</span> to design and construct its Hamilton solar project. The facility, nominally rated at 7.5 MW AC, is located in Hamilton Township, Mercer County, N.J. RMT says it will begin construction in June, with commissioning in November. RMT is responsible for engineering, procurement, and construction (EPC) of the foundations and racking systems, the PV modules, the DC and AC collector systems, the SCADA system, and testing and commissioning. The project will involve installation of more than 30,000 Suntech 280-Watt crystalline PV modules.</p>
<p><span class="boldred">The California Public Utilities Commission</span> (CPUC) approved <span class="boldred">Pacific Gas &amp; Electric</span>’s 20-year contract to purchase 150 MW of solar power from <span class="boldred">Sempra Generation</span>’s Mesquite Solar 1 PV power facility in Arizona. Mesquite Solar 1 is the first phase of Sempra Generation’s planned 700-MW Mesquite Solar complex located 40 miles west of Phoenix. With approval of the contract secured, the company plans to begin construction in June.</p>
<p><span class="boldred">San Diego Gas &amp; Electric (SDG&amp;E)</span> and subsidiaries of <span class="boldred">Soitec Solar Development</span> signed three contracts with a combined capacity of 30 MW of solar energy. The electricity will be generated at three solar power plant sites in San Diego County that will use Soitec CPV modules to be manufactured in a new factory being built in the San Diego area. The contracts require approval from the California Public Utilities Commission.</p>
<p><span class="boldred">San Diego Gas &amp; Electric (SDG&amp;E)</span> entered a 20-year contract for up to 156 MW of power supplied from the first phase of Sempra Generation’s Energía Sierra Juárez wind project in Baja California, Mexico. Both SDG&amp;E and Sempra Generation are subsidiaries of Sempra Energy. SDG&amp;E selected Energía Sierra Juárez as part of the utility’s 2009 competitive solicitation for renewable resources. The project was compared to other competitive bids, and the process was overseen by an independent evaluator, as required by the California Public Utilities Commission (CPUC). The contract is subject to approval by the CPUC and Federal Energy Regulatory Commission. Construction on Energía Sierra Juárez 1, about 70 miles east of San Diego and just south of the U.S.-Mexico border, is expected to begin in 2012.</p>
<p><span class="boldred">Ocean Power Technologies</span> (OPT) awarded four contracts to Oregon companies in connection with the manufacturing of its PB150 PowerBuoy wave energy generating device. The four companies receiving contracts are: American Bridge Manufacturing, Oregon Iron Works, Cascade General (a subsidiary of Vigor Industrial), and Sause Bros. Inc. After the initial PowerBuoy is deployed and tested off the coast of Reedsport, expected later this year, OPT plans to construct the first commercial-scale wave power station in the United States, consisting of up to nine additional PowerBuoys and grid connection infrastructure, subject to receipt of all necessary regulatory approvals and additional funding.</p>
<p><span class="boldred">Areva Solar</span> was awarded a major contract to install a 44-MW solar thermal augmentation project at a 750-MW coal-fired power station in Queensland, Australia. Areva says the project is the largest solar project in the Southern Hemisphere and the world’s largest solar power augmentation project at a coal-fired facility. Areva Solar will use its Australian-pioneered compact linear Fresnel reflector (CLFR) technology at CS Energy’s Kogan Creek Power Station. Construction is scheduled to begin in the first half of 2011, with commercial operation planned for 2013.</p>
<p><span class="boldred">Sempra Generation</span> entered a 20-year contract to sell 21 MW of wind energy to <span class="boldred">Maui Electric Company</span> from the Auwahi Wind project on the Ulupalakua Ranch in the southeastern region of Maui. The project is currently undergoing environmental review by Maui County, and state and federal agencies. Construction is expected to begin in early 2012.</p>
<h4>DR and Customer Systems</h4>
<p><span class="boldred">Baltimore Gas and Electric</span> (BGE) selected Opower’s Advanced Customer Engagement (ACE) platform as the front-end solution for its upcoming smart meter rollout. Opower’s ACE platform takes individual and neighborhood energy-usage data and transforms it into personalized reports that help customers understand their own energy usage more clearly. The reports also offer advice on ways to reduce energy use, helping customers lower their gas and electricity bills.</p>
<p><span class="boldred">Con Edison</span> added Apogee’s online tools to its website, <a href="http://www.conEd.com">www.conEd.com</a>, as part of its “The Power of Green” campaign, to help customers evaluate their energy use and find ways to save on their energy costs. The Energy Toolkit provides answers to energy questions; the HomeEnergyCalculator analyzes the customer’s energy use and makes recommendations for savings; and specialized calculators allow customers to run what-if scenarios on the use of lighting, appliances, TVs, and thermostat settings.</p>
<p><span class="boldred">GreenHouse Holdings</span> announced a partnership with <span class="boldred">EnergyConnect</span>. Together, the companies will offer customers integrated energy management and automated demand response (auto-DR) services. Under the terms of the agreement, GreenHouse will offer its auto-DR services to EnergyConnect’s customers, and EnergyConnect will market its products to Greenhouse’s customer base.</p>
<p><span class="boldred">SavWatt USA</span> subsidiary <span class="boldred">Pro EcoSolutions</span> entered a non-exclusive agreement with <span class="boldred">Comverge</span> and <span class="boldred">Con Edison</span> to implement their targeted demand side management program, which offers incentives for upgrading to more energy efficient equipment. Pro EcoSolutions will work with New York City businesses to replace existing incandescent bulbs, subsidize the cost of lighting, and administer the installation. Con Edison will be paying Pro EcoSolutions 65 cents per Watt saved.</p>
<h4>Metering</h4>
<p><span class="boldred">Kansas City Board of Public Utilites</span> (KCBPU) selected <span class="boldred">Elster</span> for the utility’s smart grid deployment. KCBPU will implement Elster’s EnergyAxis to streamline business and operational processes. The municipal utility plans to deploy more than 69,000 of Elster’s smart electric meters and 55,000 Elster smart water meters over the next few years.</p>
<p><span class="boldred">Comision Federal de Electricidad</span> (CFE) selected <span class="boldred">Elster</span>’s EnergyAxis smart grid solution to power the utility’s first advanced metering infrastructure (AMI) project in Mexico City. The Mexican Secretaria de Energia (SENER) and CFE will use the EnergyAxis pilot as a benchmark for evaluating Elster’s technologies for potential future deployments. CFE has already deployed nine other EnergyAxis systems throughout 14 of Mexico’s 16 service areas.</p>
<p><span class="boldred">BC Hydro</span> awarded a $270 million contract to <span class="boldred">Itron</span> to supply smart metering and meter data management systems. Itron will provide its OpenWay smart meters, run over a multi-application communication network powered by Cisco.</p>
<h4>EVs and Storage</h4>
<p><span class="boldred">Duke Energy</span> plans to store electricity generated at its Notrees Windpower project in west Texas using an energy storage and power management system developed by Austin-based <span class="boldred">Xtreme Power</span>. Duke Energy will work with the Energy Reliability Council of Texas (ERCOT) to integrate the wind power and battery storage system into the state’s independent power grid. The Electric Power Research Institute (EPRI) will advise the project team, collect data and help assess the potential for broader adoption of energy storage solutions throughout the industry. Duke Energy is targeting an in-service date for the battery storage system by late 2012.</p>
<p><span class="boldred">Siemens Energy</span> was commissioned to install five multi-level electric vehicle (EV) charging stations to support Loudoun County, Va.’s new commuter park-and-ride lot in Scott Jenkins Memorial Park. Siemens multi-level charging stations are designed for public outdoor applications. The stations deliver Level II charging and Level I charging through two separate outputs, which can deliver energy simultaneously. Siemens’ EV charging stations will be equipped with connectivity via the ChargePoint Network, which allows access to all manufacturers of vehicle charging stations, provides station monitoring and driver support, and mobile apps for station status and charging notifications. The stations were scheduled to be installed at the Loudoun County park in May 2011.</p>
<p>The <span class="boldred">EA Technology Group</span> collaborated with <span class="boldred">Energetix Pnu Power</span> to market compressed air batteries worldwide. Headquartered close to Energetix Pnu Power in Capenhurst, U.K., EA Technology will use its network of offices in the United States, China, Middle East and Australia, together with 35 distribution partners, to develop sales of Pnu Power products in a range of power backup and uninterruptible power supply applications. These include utility switching, industrial processes and data centers.</p>
<p><span class="boldred">Newmark Energy Solutions</span> (NES) formed strategic relationships with <span class="boldred">UTC Power Corp.</span> (UTC), <span class="boldred">Newmark Knight Frank</span>, and <span class="boldred">Austin Energy Partners Solutions</span> (AEP) to market, deliver, maintain and warranty fuel cells to commercial real estate markets across the United States. NES distributes UTC Power stationary fuel-cell units in the United States, and plans to permit, design, finance, construct, and operate a fleet of UTC fuel cells, installing 20 MW of capacity each year. Under the strategic relationship with Newmark Energy Solutions, UTC will provide fuel-cell product and support, while Newmark brings commercial real estate resources and expertise. AEP is expected to provide risk management expertise.</p>
<h4>People</h4>
<p><span class="boldred">SightLogix</span> appointed <span class="boldred">Jack Tomarchio</span> to its board of directors. Tomarchio is a former deputy secretary for intelligence and analysis operations under Pres. George W. Bush. Before that Tomarchio practiced law with an expertise in national security issues. He recently retired as a colonel from the United States Army Reserve where his last assignment was with the United States Special Operations Command.</p>
<p><span class="boldred">Ross Malme</span> joined <span class="boldred">Skipping Stone</span> as a partner and member of the board of directors as an equity owner. Malme previously held executive-level roles with Schneider Electric’s demand response resource center, Enron Energy Services, Schlumberger and Chevron. Ross was also the founder and CEO of RETX, a demand response technology firm, which has since been acquired by Schneider Electric. He served as chairman of Peak Load Management Alliance (PLMA) and formed a global demand response initiative in conjunction with the International Energy Agency (IEA).</p>
<h4>M&amp;A</h4>
<p><span class="boldred">Google</span> and subsidiaries of <span class="boldred">ITOCHU</span> and <span class="boldred">Sumitomo</span> joined <span class="boldred">GE Energy Financial Services</span> and developer and managing member <span class="boldred">Caithness Energy</span> as owners of the 845-MW Shepherds Flat wind project under construction near Arlington, Ore. The three new participants are investing approximately $500 million in the $2 billion project. The Shepherds Flat wind project stretches across 30 square miles of Gilliam and Morrow Counties in north-central Oregon.</p>
<p><span class="boldred">Lincoln Renewable Energy</span><span class="boldred">(LRE) </span>closed a $41 million power sale and project finance deal with Macquarie Energy. As part of the deal, Macquarie will enter a long-term purchase agreement for power and renewable energy credits from LRE’s New Jersey Oak solar project, and Macquarie will provide construction financing and term debt. LRE will be the long-term owner of the facility. Quanta Services is building the plant and providing O&amp;M services under an EPC contract. The New Jersey Oak solar project is a 10-MW PV project to be constructed in Fairfield Township, Cumberland County. The project will consist of some 55,000 solar panels constructed on a 100-acre site and will connect to Atlantic City Electric’s distribution system when it’s completed late in 2011.</p>
<p><span class="boldred">Ioxus Inc</span>. received $21 million from Energy Technology Ventures, a GE-NRG Energy-ConocoPhillips joint venture; Northwater Capital through its Northwater Intellectual Property Fund; Aster Capital (representing Alstom, Schneider Electric and Rhodia); and return investor Braemar Energy Ventures. Ioxus will use this funding to develop its technology and expand sales, marketing and manufacturing to meet growing demand for ultracapacitors.</p>
<p><span class="boldred">Calico Energy Services</span> received financial backing from Point B Capital and engaged the services of Point B, a management consulting firm that specializes in strategic execution. The investment provides capital to accelerate the company’s growth, and will allow Calico to use Point B’s leadership and management consulting services.</p>
<p><span class="boldred">Nexamp</span> acquired <span class="boldred">SolVera Energy</span> as part of an initiative to grow its utility-scale and distributed renewable energy business. The company also formed into two new business units, Renewable Energy Solutions and Clean Energy Advisory Services, which is focused on energy efficiency consulting services for commercial and industrial customers.</p>
<p><span class="boldred">Pattern Energy</span> partnered with <span class="boldred">Samsung Renewable Energy</span> to acquire wind power projects in Ontario from Acciona and Boralex. These projects will be combined with Pattern and Samsung’s larger South Kent Wind Farm, which is under development. The 270 MW wind farm is located in the Regional Municipality of Chatham-Kent. Samsung and its partners have an agreement with the Province of Ontario to provide 2,500 MW of new renewable energy. The first phase involves 400 MW of wind power and 100 MW of solar power. The companies secured dedicated transmission capacity for these initial projects. Pattern and Samsung agreed to develop more than 500 MW of wind power using Ontario-made wind turbine components from the new factories in Tillsonburg and in Windsor.</p>
<p><span class="boldred">Pattern and Samsung</span> recently announced the acquisition of land from the Fargo Wind Project from <span class="boldred">Suncor Energy</span> and a nearby wind project development from <span class="boldred">Northland Power</span>.</p>
<p><span class="boldred">DeWind Co</span>, a wholly owned subsidiary of <span class="boldred">Daewoo Shipbuilding and Marine Engineering</span>, acquired the rights for the 20-MW Frisco wind project, located in the northern-most portion of Hansford County, Texas, from local developer Distributed Wind Systems. DeWind will install 10 of its 2-MW D8.2 wind turbines at the Frisco site, which is scheduled to be in commercial operation by the end of 2011. The D8.2 turbines will be furnished from DeWind assembly contractor TECO-Westinghouse located in Round Rock, Texas.</p>
<p><span class="boldred">PPL</span> completed its acquisition of the <span class="boldred">Central Networks</span> electricity distribution business, the second-largest such business in the United Kingdom. PPL, through a U.K. subsidiary, acquired Central Networks from E.ON UK plc for $5.7 billion in cash, inclusive of certain permitted pre-closing adjustments, and $800 million of existing public debt to be assumed through consolidation. To complete closing, PPL used acquisition financing under a syndicated bridge facility arranged by Bank of America Merrill Lynch and Credit Suisse. The permanent financing plan includes a combination of common stock, equity units and debt. PPL expects to complete the permanent equity financing in the second quarter of 2011 and the debt financing by the end of the year.</p>
<p>The boards of directors of <span class="boldred">Exelon</span> and <span class="boldred">Constellation Energy</span> agreed to combine the two companies in a stock-for-stock transaction. Under the terms of the transaction, Constellation investors would receive the equivalent of $38.59 a share, about an 18-percent premium. The combined entity would have a market value of roughly $34 billion. The resulting company would retain the Exelon name and be headquartered in Chicago. Exelon’s power marketing business (Power Team) and Constellation’s retail and wholesale business would be consolidated under the Constellation brand and be headquartered in Baltimore. Both companies’ renewable energy businesses also would be headquartered in Baltimore, and the three utilities within the new Exelon—BGE, ComEd and PECO—would remain standalone organizations.</p>
<p> </p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/generation-markets">Generation &amp; Markets</a></li><li class="taxonomy-term-reference-1"><a href="/article-categories/td-grid">T&amp;D Grid</a></li><li class="taxonomy-term-reference-2"><a href="/article-categories/finance">Finance</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-department field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Department: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/department/vendor-neutral">Vendor Neutral</a></li></ul></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
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<a href="/tags/abb">ABB</a><span class="pur_comma">, </span><a href="/tags/abmet">ABMet</a><span class="pur_comma">, </span><a href="/tags/acciona">Acciona</a><span class="pur_comma">, </span><a href="/tags/aep">AEP</a><span class="pur_comma">, </span><a href="/tags/alstom">Alstom</a><span class="pur_comma">, </span><a href="/tags/alstom-grid">Alstom Grid</a><span class="pur_comma">, </span><a href="/tags/american-electric-power">American Electric Power</a><span class="pur_comma">, </span><a href="/tags/american-municipal-power">American Municipal Power</a><span class="pur_comma">, </span><a href="/tags/american-transmission">American Transmission</a><span class="pur_comma">, </span><a href="/tags/american-transmission-co">American Transmission Co.</a><span class="pur_comma">, </span><a href="/tags/ami">AMI</a><span class="pur_comma">, </span><a href="/tags/amp">AMP</a><span class="pur_comma">, </span><a href="/tags/apogee">Apogee</a><span class="pur_comma">, </span><a 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class="pur_comma">, </span><a href="/tags/massachusetts-greenhouse-gas">Massachusetts Greenhouse Gas</a><span class="pur_comma">, </span><a href="/tags/massdep">MassDEP</a><span class="pur_comma">, </span><a href="/tags/maui-electric-co">Maui Electric Co</a><span class="pur_comma">, </span><a href="/tags/maui-electric-company">Maui Electric Company</a><span class="pur_comma">, </span><a href="/tags/merrill-lynch">Merrill Lynch</a><span class="pur_comma">, </span><a href="/tags/mesquite">Mesquite</a><span class="pur_comma">, </span><a href="/tags/mesquite-solar-1">Mesquite Solar 1</a><span class="pur_comma">, </span><a href="/tags/miso">MISO</a><span class="pur_comma">, </span><a href="/tags/mountaineer">Mountaineer</a><span class="pur_comma">, </span><a href="/tags/network">Network</a><span class="pur_comma">, </span><a href="/tags/new-haven">New Haven</a><span class="pur_comma">, </span><a href="/tags/new-jersey">New Jersey</a><span class="pur_comma">, </span><a 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</span><a href="/tags/sepa">SEPA</a><span class="pur_comma">, </span><a href="/tags/sgip">SGIP</a><span class="pur_comma">, </span><a href="/tags/shepherds-flat">Shepherds Flat</a><span class="pur_comma">, </span><a href="/tags/siemens">Siemens</a><span class="pur_comma">, </span><a href="/tags/siemens-energy">Siemens Energy</a><span class="pur_comma">, </span><a href="/tags/sightlogix">SightLogix</a><span class="pur_comma">, </span><a href="/tags/skipping-stone">Skipping Stone</a><span class="pur_comma">, </span><a href="/tags/smart-grid-interoperability-panel">Smart Grid Interoperability Panel</a><span class="pur_comma">, </span><a href="/tags/soitec-solar-development">Soitec Solar Development</a><span class="pur_comma">, </span><a href="/tags/solar">Solar</a><span class="pur_comma">, </span><a href="/tags/solar-electric-power-association">Solar Electric Power Association</a><span class="pur_comma">, </span><a href="/tags/solar-panels">solar panels</a><span class="pur_comma">, </span><a href="/tags/solar-power-partners">Solar Power Partners</a><span class="pur_comma">, </span><a href="/tags/south-mississippi-electric-power">South Mississippi Electric Power</a><span class="pur_comma">, </span><a href="/tags/southwest-power-pool">Southwest Power Pool</a><span class="pur_comma">, </span><a href="/tags/spp">SPP</a><span class="pur_comma">, </span><a href="/tags/storage">storage</a><span class="pur_comma">, </span><a href="/tags/sumitomo">Sumitomo</a><span class="pur_comma">, </span><a href="/tags/survalent-technology">Survalent Technology</a><span class="pur_comma">, </span><a href="/tags/technology">Technology</a><span class="pur_comma">, </span><a href="/tags/transmission">Transmission</a><span class="pur_comma">, </span><a href="/tags/tres-amigas">Tres Amigas</a><span class="pur_comma">, </span><a href="/tags/trina-solar">Trina Solar</a><span class="pur_comma">, </span><a href="/tags/utc-power">UTC Power</a><span class="pur_comma">, </span><a href="/tags/utc-power-corp">UTC Power Corp</a><span class="pur_comma">, </span><a href="/tags/webberville">Webberville</a><span class="pur_comma">, </span><a href="/tags/western-electricity-coordinating-council">Western Electricity Coordinating Council</a><span class="pur_comma">, </span><a href="/tags/wind">Wind</a><span class="pur_comma">, </span><a href="/tags/xtreme-power">Xtreme Power</a> </div>
</div>
Wed, 01 Jun 2011 04:00:00 +0000puradmin14100 at http://www.fortnightly.comSolar Hype and Hopehttp://www.fortnightly.com/fortnightly/2011/03/solar-hype-and-hope
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Utility-scale projects suffer growing pains.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Michael T. Burr, Editor-in-Chief</p>
</div></div></div><div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Frontlines</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><span class="s1"><strong>Michael T. Burr</strong> is <em>Fortnightly’s</em> editor-in-chief. Email him at </span><span class="s2"><a href="mailto:burr@pur.com">burr@pur.com</a>.</span></p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - March 2011</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Solar scale-up seems to be happening even faster. Although there are still plenty of small projects—in the kilowatts and single-digit megawatts—many recent contracts involve massive systems in the 200-MW, 500-MW and even the gigawatt range.</p>
<p>Of course, few if any of these large projects would exist today without federal tax subsidies and state-level renewable portfolio standards (RPS)—especially those with solar carve-outs. And solar power still suffers many of the same limitations that plague wind power. Namely, it’s variable and non-dispatchable; its capacity factor never will rival the typical fossil, nuclear or large hydro plant; and on a per-kilowatt basis, it remains more expensive than the least-cost fossil alternatives—or wind power in most cases.</p>
<p>Nevertheless, the dramatic scale-up in project size is bringing solar into the mainstream as a utility-scale generation resource—and as an investment opportunity <i>(see “<a href="http://www.fortnightly.com/fortnightly/2011/03/chasing-un">Chasing the $un</a>”)</i>. No longer can solar be dismissed as a novelty or a publicity stunt, à-la the solar panels on Jimmy Carter’s White House. Further, solar brings some advantages that suggest its long-term potential exceeds that of wind power, perhaps by a wide margin.</p>
<p>Solar projects are easier to site because sunlight is geographically ubiquitous and more consistent than wind is. And solar facilities produce power in a way that’s more closely matched to the load curve—<i>i.e.</i>, they reach their maximum output just as cooling demand is peaking.</p>
<p>These factors alone are enough to assure opportunities for solar energy. But a third factor might prove to be a game changer: solar still has a lot of room for improvement in efficiency and cost. Wind technology can still improve too, but such improvements likely will be incremental. By comparison, PV’s cost-per-performance ratio has been advancing at an exponential pace—and there’s no reason to expect that pace will slow down much any time soon.</p>
<h4>Solar Flameout</h4>
<p>Despite the promise, contracts for large projects haven’t yet translated into much steel in the ground. The fact is, of the many announced projects exceeding 100 MW in size, exactly zero have entered service. The country’s largest operating PV plant, Sempra’s Copper Mountain facility, has a maximum capacity of less than 50 MW, and the biggest solar thermal plants, the 80-MW SEGS VIII and IX plants, were built 20 years ago.</p>
<p>That’s not to say some of the mega-solar projects now in development won’t get built. Abengoa Solar, for example, secured $1.45 billion in financing to build what it says will be the world’s largest parabolic trough CSP plant, the 250-MW Solana project near Phoenix. Abengoa has a 30-year PPA with Arizona Public Service, and a loan guarantee from the Department of Energy. Projects like that, fully financed and now in construction, seem likely to reach the finish line.</p>
<p>But a string of major project cancellations raises real questions about how many of the current crop will survive.</p>
<p>• Developer Solar Millennium in late January 2011 canceled its plans to build a 250-MW parabolic-trough plant near Ridgecrest in California’s Mojave Desert. The project reportedly was canceled after concerns were raised about its effect on habitat critical to endangered desert tortoises and other threatened species.</p>
<p>• Southern California Edison in December 2010 canceled a 20-year, 663.5-MW power purchase agreement (PPA) it had signed with a parabolic-dish project that began development in 2005, also in the Mojave Desert. Soon thereafter, the project’s developer, Stirling Energy Systems, sold the project to K Road Power, which abandoned the parabolic-dish technology for most of the project, in favor of PV panels. The change in plans negates a key license the project received from the California Public Utilities Commission, and in effect sends the project back to the drawing board.</p>
<p>• Last June, the developer of a hybrid solar and biomass project planned for Fresno County, Calif., withdrew its license application, citing “issues regarding project economics and biomass supply amongst other things.” The project had a 107-MW, 20-year PPA with PG&amp;E.</p>
<p>• Developer Starwood Energy Group in late 2009 canceled a PPA with Arizona Public Service for a 290-MW solar thermal project after Lockheed Martin withdrew as the general contractor, citing “unexpectedly high supply base costs,” as well as the overall size and risk profile of the project.</p>
<p>Several other projects have fallen under the crosshairs of environmental advocates and Native American groups. Most recently, in December 2010 petitioners led by the La Cuna de Aztlan Sacred Sites Protection Circle sued the Department of the Interior, alleging Interior’s Bureau of Land Management violated several federal statutes when granting permits to build projects on public lands that contain burial grounds and cultural relics. The lawsuit challenges permits for BrightSource’s Ivanpah, Tessera’s Imperial Valley, Solar Millennium’s Blythe, NextEra’s Genesis and Chevron’s Lucerne Valley sites.</p>
<p>Whether such setbacks are merely part of the technology’s growing pains, or whether they reveal fundamental flaws, might determine whether the current vision for utility-scale solar can succeed.</p>
<h4>Developing Options</h4>
<p>To the degree solar projects fail because their owners can’t access financial markets, utilities might bring a compelling solution. Utility backing can reduce financing costs and provide a more solid economic foundation than many independent developers can deliver. Further, utilities can help projects overcome the regulatory, technical and operational challenges that any new technology is bound to encounter in its journey to maturity.</p>
<p>And make no mistake, solar technology remains immature. The first wave of utility-scale projects—and project failures—revealed some of the pitfalls. But project sponsors will continue running into problems, and utilities and regulators can expect tough questions from investors and ratepayers when the bills come due for fixing those problems.</p>
<p>From a policy perspective, bringing solar into the mainstream serves customers’ interests, because it adds technology options to the fuel-diversity menu. And from a business perspective, solar power clearly is emerging as a viable generation investment.</p>
<p>Utilities have a natural and essential role to play in realizing solar energy’s vast potential, and making it work as part of a safe, reliable and affordable power system.</p>
<h4>Errata</h4>
<p>In the printed version of the February 2011 article, “<a href="http://www.fortnightly.com/fortnightly/2011/02/capacity-contest">Capacity Contest</a>” (p.25), we erroneously stated that American Electric Power had left the Midwest ISO to become a member of the PJM regional transmission organization (RTO). In fact AEP decided not to join the Midwest ISO upon the dissolution of the proposed MISO rival, the Alliance RTO, and instead joined PJM.</p>
<p>In the printed version of the January 2011 “<a href="http://www.fortnightly.com/fortnightly/2011/01/people">People</a>” department, we stated that Calpine named Thad Hill CEO. In fact he was named COO.</p>
<p><i>Fortnightly</i> regrets these errors, and has corrected them in the online versions of the respective articles.</p>
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<a href="/tags/abengoa-solar">Abengoa Solar</a><span class="pur_comma">, </span><a href="/tags/aep">AEP</a><span class="pur_comma">, </span><a href="/tags/american-electric-power">American Electric Power</a><span class="pur_comma">, </span><a href="/tags/arizona-public-service">Arizona Public Service</a><span class="pur_comma">, </span><a href="/tags/blythe">Blythe</a><span class="pur_comma">, </span><a href="/tags/brightsource">BrightSource</a><span class="pur_comma">, </span><a href="/tags/california-public-utilities-commission">California Public Utilities Commission</a><span class="pur_comma">, </span><a href="/tags/calpine">Calpine</a><span class="pur_comma">, </span><a href="/tags/chevron">Chevron</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/copper-mountain">Copper Mountain</a><span class="pur_comma">, </span><a href="/tags/csp">CSP</a><span class="pur_comma">, </span><a href="/tags/department-energy">Department of Energy</a><span class="pur_comma">, </span><a href="/tags/genesis">Genesis</a><span class="pur_comma">, </span><a href="/tags/imperial-valley">Imperial Valley</a><span class="pur_comma">, </span><a href="/tags/iso">ISO</a><span class="pur_comma">, </span><a href="/tags/k-road-power">K Road Power</a><span class="pur_comma">, </span><a href="/tags/la-cuna-de-aztlan-sacred-sites-protection-circle">La Cuna de Aztlan Sacred Sites Protection Circle</a><span class="pur_comma">, </span><a href="/tags/lockheed">Lockheed</a><span class="pur_comma">, </span><a href="/tags/lockheed-martin">Lockheed Martin</a><span class="pur_comma">, </span><a href="/tags/lucerne-valley">Lucerne Valley</a><span class="pur_comma">, </span><a href="/tags/midwest-iso">Midwest ISO</a><span class="pur_comma">, </span><a href="/tags/miso">MISO</a><span class="pur_comma">, </span><a href="/tags/nextera">NextEra</a><span class="pur_comma">, </span><a href="/tags/pjm">PJM</a><span class="pur_comma">, </span><a href="/tags/ppa">PPA</a><span class="pur_comma">, </span><a href="/tags/pv">PV</a><span class="pur_comma">, </span><a href="/tags/rps">RPS</a><span class="pur_comma">, </span><a href="/tags/rto">RTO</a><span class="pur_comma">, </span><a href="/tags/sempra">Sempra</a><span class="pur_comma">, </span><a href="/tags/solana">Solana</a><span class="pur_comma">, </span><a href="/tags/solar">Solar</a><span class="pur_comma">, </span><a href="/tags/solar-millennium">Solar Millennium</a><span class="pur_comma">, </span><a href="/tags/solar-panels">solar panels</a><span class="pur_comma">, </span><a href="/tags/southern-california-edison">Southern California Edison</a><span class="pur_comma">, </span><a href="/tags/starwood-energy-group">Starwood Energy Group</a><span class="pur_comma">, </span><a href="/tags/stirling-energy-systems">Stirling Energy Systems</a><span class="pur_comma">, </span><a href="/tags/tessera">Tessera</a><span class="pur_comma">, </span><a href="/tags/wind">Wind</a> </div>
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Tue, 01 Mar 2011 05:00:00 +0000puradmin14114 at http://www.fortnightly.comTransmission Preemptionhttp://www.fortnightly.com/fortnightly/2010/11/transmission-preemption
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Federal policy trumps state siting authority.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Catherine R. Connors et al.</p>
</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><b>Cathy Connors</b> and <b>Deborah Shaw</b> are partners and <b>Tim Schneider</b> is an associate in Pierce Atwood LLP’s energy practice group, in Portland, Maine and Washington, D.C.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - November 2010</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Tradition holds that the siting of electricity transmission infrastructure lies within the bailiwick of state authorities. But growing concerns about the integrity of the interconnected system recently have led to greater regional and federal involvement in determining the need for new lines and getting them built.</p>
<p>Consider the following hypothetical. After a lengthy and heated regional planning process conducted pursuant to the regional transmission organization’s (RTO’s) open-access transmission tariff, a utility receives approval to include a new transmission line in the regional system plan to meet reliability needs, thus qualifying the project for regional cost recovery. In the subsequent state approval proceeding on where the line will be located, however, the state commission staff or intervenors challenge the need for the line, and seek to use different need assumptions (<i>e.g.</i>, lower load forecasts, transfer capability, weaker risk scenarios) to support approval of a smaller project.</p>
<p>To what extent may a state commission, in considering an application for approval of a new transmission line or transmission upgrade, revisit the analysis performed in a FERC-approved regional transmission planning process that has determined the line or upgrade is necessary for regional reliability?</p>
<p>As a practical matter, if the state commission can revisit the RTO’s need assumptions and conclusions, the utility easily could find itself whipsawed between two authorities, with nothing getting built. A recent amendment to the <i>Federal Power Act</i> (Section 216) allowing FERC to authorize transmission construction if a state fails to approve lines in certain corridors within one year of application was interpreted narrowly by the Fourth Circuit not to permit FERC to override a state’s express denial of a construction permit.<sup>1</sup> But, even assuming this view prevails, it doesn’t follow that federal control over the need determinations driving the construction of new lines, within or outside those corridors, is without teeth.</p>
<p>Take, for example, Section 215 of the <i>Federal Power Act</i> (FPA), enacted, like Section 216, as a part of the <i>Energy Policy Act</i> of 2005 (EPAct).<sup>2</sup> Section 215 provides for the establishment of FERC-approved reliability standards to be followed by all transmission system users, owners, and operators. Section 215, together with other longstanding FPA provisions (<i>e.g.</i>, Sections 201, 205 and 206), constrain a state agency’s or intervenor’s efforts to prevent construction of transmission lines in a state approval proceeding. FERC’s primary jurisdiction over the reliability of transmission service means that, when a transmission project has been determined necessary by the regional body authorized by FERC (<i>i.e.</i>, an RTO), a state must honor that needs assessment, and may not collaterally attack the underlying assumptions to determine a different scope of need. If a state doesn’t give binding effect to the findings resulting from the regional planning process—for example, by requiring the utility to model different assumptions in order to support a reduction in the size of the project—it violates Sections 201, 205, 206 and 215 of the FPA, including the filed-rate doctrine. And while Section 215 provides FERC with more specific tools to address transmission reliability, including approval of reliability standards, as discussed below, the FPA gave FERC authority in this area of transmission service even before EPAct was enacted.</p>
<h4>Grid Reliability Authority</h4>
<p>FERC had jurisdiction over grid reliability even prior to enactment of Section 215.<sup>3</sup> FERC has referenced its authority over rates under Sections 205 and 206 as a basis for actions it has taken to strengthen reliability. For example, in upholding ISO New England’s installed-capacity requirement, FERC noted that it could act to assure generation resource adequacy given the interface among reliability, costs and rates:</p>
<p>[W]here an interconnected transmission system is operated on [a] regional basis as part of an organized market for electricity… all users of the system are interdependent, particularly with respect to reliability, <i>i.e</i>., one participant’s reliability decisions can impact the reliability of service available to other participants and the related costs the other participants must bear.... We find that, in situations where one party’s resource adequacy decisions can cause adverse reliability and costs impacts on other participants in a regionally operated system, it is appropriate for us to consider resource adequacy in determining whether rates remain just and reasonable and not unduly discriminatory.<sup>4</sup></p>
<p>Because FERC has exclusive jurisdiction over transmission under Section 201, the reliability of FERC-jurisdictional infrastructure falls squarely within this transmission authority, even in the absence of Section 215. When there’s an upgrade to the transmission grid, absent a voluntary assumption of cost, everyone using the grid pays for that upgrade in their transmission rates, per the rules established by FERC.<sup>5</sup> And because reliability affects costs, it also falls within FERC’s purview under FPA Sections 205 and 206.</p>
<h4>Regional Transmission Planning</h4>
<p>In Order 2000, adopted in December 1999, FERC established RTOs in part because of concerns that a more regionalized approach was needed to fulfill FERC’s jurisdictional goals, including transmission reliability.<sup>6</sup> The changes in the industry from unbundling and a more competitive market further resulted in a more intense and different use of the grid. FERC observed:</p>
<p>According to the North American Electric Reliability Council (NERC), “the adequacy of the bulk transmission system has been challenged to support the movement of power in unprecedented amounts and in unexpected directions.” These changes in the use of the transmission system “will test the electric industry’s ability to maintain system security in operating the transmission system under conditions for which it was not planned or designed.”<sup>7 </sup></p>
<p>One goal noted in particular in Order 2000 was more efficient transmission-system planning. With the close coordination between generation and transmission planning diminishing as vertically integrated utilities unbundled, it was necessary to establish regional organizations to ensure reliability. The independence of an RTO was deemed a crucial element in meeting these reliability and competitive market objectives, as was the RTO’s ultimate authority and responsibility over planning and grid expansion.</p>
<p>Eight years later, in Order 890, FERC required transmission providers (<i>i.e.</i>, notably the now fully established RTOs) to adopt an open transmission planning process that coordinates with stakeholders, including state authorities.<sup>8</sup> This process must include a “reasonable and meaningful opportunity” for stakeholders, including state commissions, “to meet or otherwise interact meaningfully,” during which all assumptions underlying transmission system plans are disclosed.<sup>9</sup> Order 890 also provides for a resolution process to manage disputes arising from the planning process. The planning process is designed to be participatory to avoid discrimination or lack of independence, and to increase transparency, with a Section 206 complaint contemplated in the absence of consensus. The thrust of Order 890 is that its requirements are being imposed under FERC’s authority pursuant to Section 206 of the FPA to prevent undue discrimination in open-access transmission service: “Transmission customers have complained that even in RTO markets there are instances when comparable transmission service is not provided, particularly in the area of transmission planning.”<sup>10</sup></p>
<p>While FERC recognized that certain issues, such as retail load, fell within the states’ bailiwick, and that siting is primarily a state concern, it stressed in Order 890 that the ultimate control over planning was within the RTO’s authority and required compliance with the FERC-approved planning process in order to ensure open and equal treatment. Even if discrimination concerns do not arise in the generally understood sense, (<i>e.g.</i>, enabling a generation-owning transmission owner to block equal access to its lines) regional consistency in assumptions discourages discrimination and prevents disparate treatment as a general matter. In contrast, a state agency’s statutorily authorized charge is state-centric (<i>i.e.</i>, to examine a proposed project solely within the prism of benefit to its citizens and ratepayers).</p>
<h4>Reliability Planning</h4>
<p>In enacting FPA Section 215, Congress explicitly gave FERC jurisdiction over all users, owners, and operators of the bulk-power system for purposes of approving reliability standards and enforcing compliance. Section 215 defines a reliability standard as:</p>
<p>[A] requirement, approved by the Commission under this section, to provide for reliable operation of the bulk-power system. The term includes requirements for the … design of planned additions or modifications to such facilities to the extent necessary to provide for reliable operation of the bulk-power system, but the term does not include any requirement to enlarge such facilities or to construct new transmission capacity or generation capacity.</p>
<p>Read in the context of Section 215 and the FPA as a whole, this provision envisions that FERC identifies through its reliability standards the extent of need for reliability purposes, while state authorities determine how to meet that need—<i>e.g.</i>, whether to build more transmission or employ non-transmission alternatives. The remaining provisions in Section 215 support this conclusion, in that they identify federal and regional bodies as the arbiters of reliability standards.</p>
<p>Consistent with the definition of a reliability standard, Section 215 specifically states that it doesn’t authorize FERC or NERC to order construction—as noted, a state is free to meet a defined need through non-transmission alternatives, such as energy efficiency and other load-reducing mechanisms. Section 215 goes on to provide that it also doesn’t authorize FERC or NERC to “set and enforce compliance with standards for adequacy or safety of electric facilities or services.” Notably, however, this language excludes reliability, indicating, consistent with the remainder of Section 215, that the statute does authorize FERC and its designees to set and enforce compliance with reliability standards. Hence, while the state can adopt different approaches to meet need, it can’t revisit the calculation of need resulting from the application of a reliability standard within the RTO planning process.</p>
<p>Section 215 clarifies FERC’s enforcement powers with regard to a transmission provider’s compliance with reliability standards:</p>
<p>On its own motion or upon complaint, the Commission [FERC] may order compliance with a reliability standard and may impose a penalty against a user or owner or operator of the bulk-power system if the Commission finds, after notice and opportunity for a hearing, that the user or owner or operator of the bulk-power system has engaged or is about to engage in any acts or practices that constitute or will constitute a violation of a reliability standard.</p>
<p>If the entity engaged in violative activity isn’t a transmission user, owner or operator, but rather a state authority, Section 215 provides that NERC and affected parties may file a petition with FERC to obtain an order determining whether the state’s action is inconsistent with a reliability standard. NERC Rules of Procedure, § 314, provides that a system owner must promptly tell the state commission, NERC and the RTO of such a potential conflict:</p>
<p>If a bulk power system owner … determines that a NERC … Reliability Standard may conflict with a[n] …order … that has been accepted, approved, or ordered by a governmental authority affecting that entity, the entity shall expeditiously notify the governmental authority, NERC and the relevant regional entity of the conflict.</p>
<p>FERC may stay state action pending issuance of its inconsistency order. Section 215 is silent, however, as to what happens after the issuance of a FERC inconsistency order. This may mean that a FERC inconsistency determination isn’t self-executing, but rather is entitled to <i>Chevron</i> deference in a Supremacy Clause claim that the affected party may assert as a declaratory judgment,<sup>11</sup> or may be cited in another appropriate adjudicatory forum, such as a Section 206 complaint proceeding.</p>
<p>With this context in mind, the regulatory framework established under Section 215 delegates decisions over the assumptions to determine need for reliability purposes to the transmission provider (<i>e.g.</i>, the RTO). Compliance with these standards is carried out pursuant to the collaborative process required by Order 890 and embodied in the transmission provider’s OATT. Under the relevant NERC transmission planning reliability standards (TPL-001 to TPL-003), if a state commission uses different modeling assumptions to suggest that the reliability need isn’t as great as the regional planning process indicates, there’s a direct conflict between a NERC reliability standard and the state’s different assumptions. The transmission-planning standards specifically delegate identification of the assumptions to be used in a needs assessment to the RTO, which in turn establishes the assumptions applied pursuant to a process described in its filed tariff.<sup>12</sup> State agencies are entitled to participate in that process. Against this backdrop, the action of a state commission rejecting the RTO’s conclusions after the regional collaborative process and simply superseding the RTO’s role in determining regional reliability needs undermines all the regional coordination objectives of FERC’s Orders 890 and 2000 and the authority bestowed by Section 215.</p>
<p>FERC is further fortifying this reliability arsenal through its recently issued Notice of Proposed Rulemaking (NOPR), <i>Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities</i>,<sup>13</sup> which seeks to bring more of the individual state issues into the regional planning process, to reduce the incidence of later disputes in state forums.</p>
<h4>Filed-rate Doctrine</h4>
<p>The filed-rate doctrine reinforces the conclusion that the determination made in the regional planning process by the RTO of the assumptions to use in applying those standards must be accepted in a state proceeding. The regional transmission planning process, as noted, is a part of the RTO’s OATT, <i>i.e</i>., its filed tariff. Under Sections 205 and 206 of the FPA, rates filed or fixed by FERC “must be given binding effect” by the state agency.<sup>14</sup> The filed-rate doctrine doesn’t mean that FERC can order what a state rate must be, or circumvent a state rate proceeding and set its own retail rates. Under the doctrine, however, a state commission in setting retail rates must give binding effect to the FERC-filed rate.</p>
<p>Under this filed-rate doctrine, the concept of rates is broad; it isn’t limited to rates <i>per se</i>, but includes utility practices that affect rates.<sup>15</sup> Focusing on this practice element, the D.C. Circuit found a violation of the doctrine with respect to a reliability rule in <i>Keyspan-Ravenswood LLC v. FERC</i>.<sup>16</sup> There, the Court of Appeals held that failure by the New York ISO to follow NYSRC reliability rules incorporated in its tariff (<i>i.e</i>., by using a formula for translating installed capacity into unforced capacity that significantly affected compliance with those rules) violated the filed-rate doctrine. Noting that “NYISO may only change its rates or ‘practices … affecting such rates’ by first filing with” FERC,<sup>17</sup> the D.C. Circuit found that NYISO’s decision to use different time spans for calculating outage rates for load-serving entities (LSEs) and generators in setting the required installed reserve margin made that calculation fall short of the installed capacity required under the NYSRC reliability rules, and thus contrary to the filed rate.</p>
<p>Like NYISO’s incorporation of the NYSRC reliability rules, many RTOs and transmission providers specifically incorporate compliance with NERC reliability standards into their tariffs’ Order 890-mandated transmission-planning process. In those cases, if a state’s deviation from the RTO’s assumptions violates the reliability standards, such actions would violate the filed-rate doctrine.</p>
<p>Precedent supports this. First, requiring the state agency to accept the assumptions and conclusions of the regional planning needs assessment doesn’t interfere with the state’s authority over siting, because nothing in the RTO’s reliability need conclusions compels construction. In ruling that establishing installed capacity requirements (ICR) was within the jurisdiction of FERC, the D.C. Circuit noted that while ICRs encouraged generation, which isn’t within FERC’s jurisdiction under FPA Section 201(b), they don’t require construction: The state can control how an LSE meets its capacity obligation by limiting the amount or type of generation built in the state, and making the LSE use demand response or buy capacity contracts.<sup>18</sup></p>
<p>Second, it’s irrelevant that the assumption decision was delegated to the RTO and not made by FERC. In applying the filed-rate doctrine to reject a state’s imprudence ruling relating to a provider’s cost allocation set pursuant to a FERC-filed service agreement, the Supreme Court found it immaterial that the agreement left discretion to the provider’s operating committee to decide, stating: “We see no reason to create an exception to the filed-rate doctrine for tariffs of this type that would substantially limit FERC’s flexibility in approving cost allocation arrangements.”<sup>19</sup> If the RTO’s filed tariff dictates who will make the needs-assessment determination, and how, a state authority can’t revisit the same issue.</p>
<p>Third, the filed-rate doctrine also precludes a state authority from interpreting and applying a federal tariff itself—hence the state can’t substitute its own assumptions based on its conclusion that the RTO misapplied NERC reliability standards. The Fifth Circuit held that a state commission couldn’t set retail rates based on its own determination that a utility failed to comply with its FERC tariff, further noting that the filed-rate doctrine didn’t just apply to the allocation formula in the filed tariff <i>per se</i>, but to the entire system integration agreement filed as a part of the tariff. “If each state could enforce its own findings as to the meaning of a filed tariff, in opposition to the conclusions of a FERC-approved agent, the conflicting interpretations would undermine FERC’s ability to ensure that a filed rate is uniform across different states, and intrude upon its exclusive jurisdiction over interstate power transactions.”<sup>20</sup></p>
<h4>Federal Preemption</h4>
<p>The general preemption principles applied under the Supremacy Clause of the Constitution confirm that the federal framework precludes states from revisiting need determinations.</p>
<p>Preemption occurs when Congress shows an intent to occupy a field, or when state action conflicts with federal law. The latter conflict preemption arises either when it’s impossible to comply with both the state and federal law or “where the state law stands as an obstacle to the accomplishment of the full purposes and objectives of Congress…”<sup>21</sup> While Section 215’s language that nothing therein shall be construed to preempt any authority of any state to take action to ensure “the safety, adequacy, and reliability of electric service within that State, as long as such action is not inconsistent with any Reliability Standard” tends to suggest only a conflict, not field preemptive scope, an equally plausible reading of this language is that a state may regulate as it chooses on its side of the bright-line jurisdictional divide between transmission and local retail service. If something relates to transmission, or interstate, reliability, then it lies within FERC’s exclusive jurisdiction.</p>
<p>Regardless of whether FERC’s exclusive control over transmission triggers field preemption analysis, state revisitation of RTO need assumptions and conclusions undermines the FPA’s objectives, as set forth in the statute itself and FERC orders and precedent, triggering conflict preemption. As the Fourth Circuit stated when findings preempted a state commission’s revisitation of a cost allocation embodied in a filed transmission- equalization agreement (TEA):</p>
<p>Preemption principles deny state authority to act in a way that would undermine the purposes of federal law. The FPA’s policy statement expresses the Act’s purpose as protection of the public interest affected by the transmission and sale of electric energy in interstate commerce. <em>[See 16 U.S.C. § 824(a)]</em>. The public interest thus protected is, of course, national in scope. The history of the FPA underlines the importance of the broad scope of the public interest the legislation seeks to protect.</p>
<p>Contrasted with this broad public interest protected by federal regulation is the narrower state public interest advanced by PSC regulation. Because the prudence inquiry is inseparable from an inquiry into the TEA’s justness and reasonableness, FERC and the PSC would be making identical, independent inquiries regarding the merits of the TEA but from the perspective of different public interests. It is possible that FERC and the PSC would reach conflicting conclusions regarding the impact of the agreement on their respective publics. Only FERC, as a central regulatory body, can make the comprehensive public-interest determination contemplated by the FPA and achieve the coordinated approach to regulation found necessary in <i>[Public Utilities Comm’n of R. I. v. Attleboro Steam &amp; Electric Co.</i>, 273 U.S. 83 (1927)]. No single state commission has the jurisdiction, and neither can it be expected to have the competence or inclination, to make this broad determination… <sup>22 </sup></p>
<p>The same reasoning applies to regional planning assumptions. FERC, NERC and RTOs haven’t been given power under Section 215 to force the state agency to approve a particular transmission project, or to circumvent the state agency and order the project to be built. If a utility wanted to obtain such an order, it would need to seek it from FERC under Section 216. But this doesn’t mean the state agency can ignore or re-examine RTO assumptions in its siting proceeding. FERC’s exclusive control over transmission in interstate commerce and RTO regional planning processes requires a state authority, charged with different, parochial concerns, to respect the reliability determination established through the regional process set forth in a FERC-filed tariff.</p>
<p>Finally, there’s nothing novel about a federal regulatory framework whose preemptive scope limits the justification for, but not the entire sphere of, the state action. This is precisely the delineation used in the <i>Atomic Energy Act </i>when addressing issues relating to the siting of nuclear plants.<sup>23</sup> A federal-state jurisdictional divide in which the federal authority and its regional designee are in charge of setting reliability standards and applying them to determine the scope of need, and state authorities are in charge of determining whether to meet that need through transmission (and where to place the transmission), is thus consistent with other federal legislation.<sup>24</sup></p>
<p>In sum, while the exact ambit of FERC’s siting authority under Section 216 after the Fourth Circuit’s decision in <i>Piedmont </i>will no doubt be thrashed out at a later date, Section 215, bolstered by pre-existing FPA provisions, the filed-rate doctrine and general preemption principles, shouldn’t be overlooked when determining the scope of the RTO’s authority over transmission planning and authorization versus that of state and local authorities. If the interconnected transmission system is to be protected through regional oversight and federally authorized reliability standards, states can’t be permitted to substitute their own need determinations for that of the RTO and thus bring the construction of new infrastructure to a standstill.</p>
<p>The current federal framework certainly encourages cooperation among federal, regional and state authorities, seeking mightily to avoid conflict. But if such conflict happens, that current federal framework contains the legislative and regulatory authority needed to preserve federal and regional control over the transmission system.</p>
<p> </p>
<h4>Endnotes:</h4>
<p>1. <i>Piedmont Environmental Council v. FERC</i>, 558 F. 3d 304 (4th Cir. 2009).</p>
<p>2. Sections 215 and 216 of the FPA, referenced throughout this article, are codified at 16 U.S.C. §§ 824o &amp; 824p.</p>
<p>3. <i>See Gainesville U. Dept. v. Fla. Power Corp.</i>, 402 U.S. 515, 529 (1971) (referencing FERC’s “responsibility to the public to assure reliable efficient electric service”).</p>
<p>4. <i>ISO New England, Inc.,</i> 119 FERC ¶ 61,161 at P25 (2007) (citation omitted), <i>pet’n for rev. denied, sub nom. Connecticut DPU v. FERC</i>, 569 F.3d 477 (2009).</p>
<p>5. See <i>Exxon Mobil Corp. v. FERC</i>, 571 F.3d 1208, 1213 (D.C. Cir. 2009) (“Network Upgrades … improve the entire network, thus their cost must be spread among all users.”).</p>
<p>6. <i>See, e.g.</i>, Order 2000, 65 Fed. Reg. 810, 811 (Jan. 6, 2000) (89 FERC ¶ 61,285 (Dec. 20, 1999).</p>
<p>7. <i>Id</i>. at 814 (citations omitted). NERC later became the Electric Reliability Organization certified by FERC under Section 215 to develop, propose, and enforce (subject to FERC review) grid-reliability standards.</p>
<p>8. <i>See Order 890, Preventing Undue Discrimination and Preference in Transmission Service</i>, 72 Fed. Reg. 12266 (Mar. 15, 2007) [slip op. P 438 (Feb. 16, 2007)].</p>
<p>9. <i>Id</i>. PP 453, 460, 471.</p>
<p>10. <i>See id</i>. P 21.</p>
<p>11. <i>See Tennessee v. U.S. DOT</i>, 326 F.3d 729, 736 (6th Cir. 2003) (interpreting somewhat similar 49 U.S.C. § 5125).</p>
<p>12. <i>See, e.g.</i>, NERC TPL-003, Requirement 1.3.2; <i>Order on Reliability Standards Interpretations</i>, 131 FERC ¶ 61,068 (2010).</p>
<p>13. 131 FERC ¶61,253 (June 17, 2010).</p>
<p><i>14. Nantahala Power &amp; Light Co. v. Thornburg</i>, 476 U.S. 953, 962 (1986).</p>
<p>15. <i>See Nantahala</i>, 476 U.S. at 966 (“[T]he filed rate doctrine is not limited to ‘rates’ <i>per se:</i> ‘our inquiry is not at an end because the orders do not deal in terms of prices or volumes of purchase.’”) (citations omitted).</p>
<p>16. 474 F.3d 804 (D.C. 2007).</p>
<p>17. <i>Id</i>. at 810.</p>
<p>18. <i>Connecticut DPU v. FERC</i>, 569 F.3d 477 (D.C. Cir. 2009).</p>
<p>19. <i>Entergy La. Inc. v. La</i>. PSC, 539 U.S. 39, 50 (2003) (“It matters . . . only whether the FERC tariff dictates how and by whom [the] classification should be made.”).</p>
<p>20. <i>AEP v. Texas</i>, 473 F.3d 581, 582, 586 (5th Cir. 2006) (citations omitted).</p>
<p>21. <i>Silkwood v. Kerr-McGee Corp</i>., 464 U.S. 238, 247 (1984); <i>see also Grays Harbor WA v. Idacorp</i>, 379 F.3d 641, 645 (9th Cir. 2004); Gade v. National Waste Management Ass’n, 505 U.S. 88, 103 (1992) (“A state law also is pre-empted if it interferes with the methods by which the federal statute was designed to reach th[at] goal.”).</p>
<p>22. <i>Appalachian Power Co. v. Public Service Comm’n of West Virginia</i>, 812 F.2d 898, 904-905 (4th Cir. 1987) (citation omitted).</p>
<p>23. <i>See Pacific Gas &amp; Elec. v. Energy Resources Commission</i>, 461 U.S. 190 (1983) (under AEA, state may preclude construction of plant based on economic, but not nuclear, factors such as safety).</p>
<p>24. This is not to say that the totality of federal preemption in the area of reliability planning is determined by the rationale on which the state authority indicates it is making its determination; effect, as well as purpose, is relevant. <i>Cf. English v. General Electric Co.</i>, 496 U.S. 72, 84 (1990) (Although “part of the pre-empted field is defined by reference to the purpose of the state law in question, ... another part of the field is defined by the state law’s actual effect.”) (citing <i>Pacific Gas</i>, 461 U.S. at 212-13).</p>
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Mon, 01 Nov 2010 04:00:00 +0000puradmin13578 at http://www.fortnightly.comWhen Shippers Seek Releasehttp://www.fortnightly.com/fortnightly/2007/07/when-shippers-seek-release
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Price caps, secondary markets, and the revolution in natural-gas portfolio management.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Bruce W. Radford</p>
</div></div></div><div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Commission Watch</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><b>Bruce W. Radford</b> is editor-in-chief for <i>Public Utilities Fortnightly</i>.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - July 2007</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>When the Federal Energy Regulatory Commission (FERC) decided in February, in Order 890, to lift the price cap for electric-transmission customers seeking to resell their grid capacity rights in the secondary market, it cautioned against expecting a <i>quid pro quo</i> for gas:</p>
<p>“Our findings here address the particular circumstances associated with the electric-utility industry and are not intended to suggest that corresponding changes should be made to the rate for capacity release by customers of natural-gas transportation capacity.</p>
<p>“Any such changes,” FERC wrote, would come “only after notice and comment based on a record applicable to the natural-gas industry.” (<i>See Docket Nos. RM05-17, RM05-25, Feb. 16, 2007, 118 FERC ¶ 61,119 at para. 814, fn. 492</i>.)</p>
<p>But wait a minute. Was the commission just teasing?</p>
<p>In fact, FERC already had opened a rulemaking investigation to consider exactly that question—whether to lift the price cap for gas-pipeline capacity releases in the secondary market. And it had done so in January, a good six weeks prior to the release of Order 890. Moreover, this prior investigation, announced as a simple request for comments, has since shaped up as perhaps the most compelling and thought-provoking policy discussion to have hit the natural-gas industry in years.</p>
<p>In this prior case, FERC asked the gas industry for thoughts and ideas that call into question a whole host of key policies that heretofore have stood at the core of how natural-gas pipeline markets have played out over the past 15 years or so:</p>
<p>1. Price Caps. The ceiling on the price that shippers can receive for releasing their firm rights to gas-pipeline capacity into the secondary market for purchase by replacement shippers, which is set at the level of the pipeline’s tariff rate, also known as the “recourse rate,” or the “maximum lawful rate.”</p>
<p>2. Posting and Bidding. Rules that have required releasing shippers to announce certain proposed release transactions on the pipeline company’s Internet site, if the release is offered at less than the pipeline’s tariff recourse rates, so that other potential buyers can have an opportunity to bid on purchasing the rights offered for reassignment.</p>
<p>3. Shipper Must Have Title. This concept, known sometimes as the SMHT rule, mandates that a customer that acquires pipeline capacity cannot use those rights to transport natural gas already owned by a third party.</p>
<p>4. Buy/Sell Transactions. The prohibition against such deals bars shippers from circumventing the SMHT rule and transporting gas for a third party by simply purchasing title to gas at the top of the transaction, and then selling it back at the end.</p>
<p>5. Tying Arrangements. Such deals also are proscribed. Thus, FERC policy has made it unlawful for those who are selling off capacity rights on a given pipeline from making the deal conditional upon a linked release or transfer of some other right, such as rights to gas supply, or rights to capacity on other pipelines.</p>
<p>These rules, which have formed the backbone of FERC’s open-access model for natural-gas pipelines and shippers for nearly two decades now, are all under attack and in play in the commission’s gas-rulemaking investigation. (<i>See Request for Comments, Docket Nos. RM06-21, RM07-4, Jan. 3, 2007, 118 FERC ¶61,005</i>.)</p>
<p>FERC’s decision to open the door to such a wide-ranging policy discussion stems from a pair of petitions filed last year by companies representing widely different sectors of the U.S. natural-gas industry. First, from the local distribution sector, came Pacific Gas &amp; Electric Co. and Southwest Gas Corp., which joined forces to demand that FERC allow gas shippers to releasing shippers to earn more than the recourse rate. (<i>See Petition for Rulemaking, FERC Docket No. RM06-21, filed Aug. 1, 2006</i>.)</p>
<p>Second came a petition from a number of energy producers and marketers, including Coral Energy, Chevron, ConocoPhillips, Constellation Energy Commodities Group, Tenaska Marketing, Merrill Lynch Commodities, and UBS Energy LLC. In this so-called “marketer petition,” the energy companies sought policy guidance from FERC to guarantee that it would allow certain pre-arranged capacity release deals, even if they might appear to violate the price cap, the tying rule, or the posting and bidding rules. (<i>See Petition for Clarification, FERC Docket Nos. RM91-11, RM98-10, filed Oct. 20, 2006.</i>)</p>
<p>The first petition had asked for natural-gas local distribution companies (LDCs) to receive top-dollar market prices for release and resale of their pipeline-capacity rights. Simply put, the LDCs wanted rights comparable to those granted to interstate pipelines. (The LDCs had become dissatisfied after FERC in early 2006 had reversed policy and had allowed the pipes to negotiate market-based rates for transportation service that reflected “basis differentials.” <em>(See Docket No. PL02-6, Jan. 19, 2006, 114 FERC ¶61,042.)</em> Such differentials track the gas- commodity price spread between two geographic trading points, such as a supply basis and a city gate delivery point.)</p>
<p>The second request, the marketer petition, asserted that commission policy on pipeline-capacity release, formulated largely during the early 1990s, had failed to keep pace with a major new development in natural-gas markets. That development was the rise of industry service contracts for the management of gas-commodity portfolios held by LDCs, load-serving entities and competitive retail-gas suppliers. In this scenario, a large-scale marketer buys up pipeline-contract rights and then calls on its expertise and economies of scale to earn a higher margin on such assets than would have been available if the LDC had continued to hold the assets. The LDC, retail supplier or load-serving utility continues as before to provide retail-gas delivery service to end users, but essentially exits the business of buying, managing, and selling the physical commodity.</p>
<p>So far, the buzz over this new gas-rulemaking initiative only has increased in intensity, now that FERC has completed work on its electric industry Order 890, and has lifted the price cap for resales of grid rights. New Jersey Natural Gas summed up a common industry opinion in its initial comments filed this spring:</p>
<p>“Given this policy shift in electric regulation, it would be perverse to fail to afford the natural-gas secondary capacity markets—which are more mature, more robust, and more competitive than electric transmission secondary markets—the same degree of flexibility.” <em>(See comments, New Jersey Natural Gas, FERC Dockets RM06-21, RM07-4, p. 16, filed Apr. 11, 2007.)</em></p>
<p>Nevertheless, the story doesn’t end here. In fact, various industry players have taken a cue from the two industry petitions, and from FERC’s announced willingness to rethink established policy, to suggest even more radical ideas. For instance, some say that FERC should give up on the idea of trying to prohibit the “brokering” of pipeline capacity by third-party shippers. Others go so far as to urge the commission to eliminate the price cap that applies to short-term firm and interruptible transportation (IT) service provided by the pipelines themselves, thus deregulating a significant portion of the primary market.</p>
<p>For example, Kinder Morgan Interstate Pipelines points out that FERC already has recognized—as in its 2005 policy statement on selective discounting by pipelines (<i>111 FERC ¶61,309</i>)—that when pipes offer short-term firm and IT services, they effectively compete against firm capacity that shippers release into the secondary market. On that occasion, FERC declared that the capacity release program “has been successful in creating a robust secondary market where pipelines must compete on price.” So if the pipes must compete against a service (capacity release) that is freed of its price cap, then FERC should deregulate the pipeline service as well. <em>(See comments, Kinder Morgan, p. 12, filed Apr. 11, 2007.)</em></p>
<p>Spectra Energy Transmission (the pipeline recently spun off by Duke Energy) tends to agree. It adds that data from the U.S. Energy Information Administration shows significant growth in the amount of capacity acquired by replacement shippers in the secondary market. <em>(See “Released Capacity Has Increased,” Natural Gas Issues &amp; Trends: 1998, EIA 1999.)</em></p>
<p>Not all agree, however. The American Public Gas Association points out that when FERC last considered deregulating the gas-pipeline primary market, seven years ago in Order 637, it had recognized the importance of maintaining cost-of-service regulation to “protect its primary constituency,” that being the captive holders of long-term firm capacity. <em>(See Dkt. Nos. RM98-10, 98-12, Feb. 9, 2000, 90 FERC ¶61,109.)</em></p>
<p>The APGA thus complains that the pipelines “are engaging in the ultimate bootstrapping, by urging deregulation of the secondary market and then urging, without a scintilla of evidence regarding the primary market, that it be deregulated as well.”</p>
<h4>Pre-Arranged Deals</h4>
<p>When FERC launched its capacity release program in 1992, as part of its groundbreaking Order 636, LDCs held the lion’s share of pipeline-capacity rights, which they needed and used to ship gas to the city gate. The commission designed capacity release to provide an outlet in the secondary market for scarce pipeline rights that weren’t being used. FERC assumed, quite logically, that LDCs would release only that capacity that they did not need.</p>
<p>Now however, it turns out some LDCs are releasing not just their unused capacity rights, but all of them, even as those rights remain crucial to retail-distribution service. And that also goes for gas-fired merchant-power producers. They have become key players in the pipeline capacity game as their share of the generation sector has grown—from 3 GW out of 778 GW in 1997 (then the total U.S. electric production base), to 192 GW out of 978 GW by 2005. And like the LDCs, merchant gens are releasing not just their unneeded pipeline rights, but all of their rights, leaving them without dedicated transportation contracts to ship gas to their turbines.</p>
<p>As the marketer petition explains, “These arrangements do not arise from a customer’s desire to rid itself of capacity; rather, they arise as a result of a customer’s desire for efficiency, cost savings, and maximization in the utilization of its capacity.”</p>
<p>To do that, shippers use capacity release to exit the business of arranging for and procuring gas supply. They turn the job over to third parties—to marketers and portfolio managers—whose primary job is to supply the customer (the releasing shipper) with gas. Along the way, the manager invests and trades in pipeline capacity, seeking opportunities to optimize profits.</p>
<p>Assistant General Counsel Craig Collins (SCANA Corp.) explains why in written comments he filed on behalf of South Carolina Elec. &amp; Gas Co. and Public Service Co. of North Carolina. Most LDCs, he writes, no longer enjoy the access to market opportunities or the human resources needed to make the best use of their transportation agreements. And that holds true, even when the requirements of distribution service are limited enough to permit them to divert some of those assets to be used for other purposes, through capacity release.</p>
<p>Sarah Tomalty, senior attorney for FPL Energy, writes further on why LDCs and merchant generators find it difficult to manage their gas supplies effectively, and glean the highest market value from the capacity contracts they sign with pipelines:</p>
<p>“Most LDCs and utilities cannot perform a bundled fuel management function themselves to capture the true market value of their pipeline capacity because activities like gas trading, hedging and ‘swing swaps’ are often discouraged under state regulations.”</p>
<p>She explains also why it can make sense for merchant generators to exit the business of gas-supply management:</p>
<p>“Certain generating units are project financed and have limited control over varying their gas asset portfolio through, for example capacity release, because the assets represent financing collateral. …</p>
<p>“Many merchant [gen] plants have been faced with difficulties in executing long-term purchased power agreements and have encountered low average spark spreads for off-peak and peak periods; therefore, they have been unable to generate the cash flow needed to contract for long-term firm natural gas transportation rights. … It does not make sense for a merchant generator that runs for only certain periods of the year to purchase long-term firm capacity on a year-round or even seasonal basis. …</p>
<p>“Also, fuel managers must have strong credit to meet the credit obligations of suppliers, pipelines, bond financiers, and end-users. As such, many end users rely on large suppliers to perform their fuel management function.” <em>(See comments, FPL Energy, pp. 9-14, filed Apr. 11, 2007.)</em></p>
<p>According to written comments filed by the American Gas Association (AGA), such difficulties may arise also from constraints imposed on the LDC itself from geography or weather.</p>
<p>As AGA explained, an LDC in a cold weather region that serves load driven largely by temperature-sensitive residential and small commercial customers with low load factors may find it difficult to manage its pipeline-capacity rights. The problem is exacerbated if the LDC lacks storage capacity in nearby market areas.</p>
<p>The key to the deal is the package, according to Ron Neal, division director for Macquarie Cook Energy LLC. Neal explains that in these pre-arranged deals for beneficial capacity release, “The combination of the transportation capacity and the commodity is essential to the nature of the product; absent such a combination, the LDC would not be releasing the capacity in the first place.”</p>
<p>Thus, the replacement shipper that acquires the released capacity will want to acquire as diverse a portfolio as possible, of both supply and capacity, so as to maximize margins through greater economies of scale. The larger the margin, the greater the benefits that will be remanded back to the releasing LDC shipper (with a percentage share flowed back to retail ratepayers, as is typically required by state public utility commissions).</p>
<p>These complex deals may involve payment of a transaction fee to the portfolio manager, who becomes the replacement shipper. Payment may come in the form of a lump sum, or as a share of revenues to be earned in connection with future gas sales. Or, perhaps the releasing LDC shipper may agree to reimburse the portfolio manager for capacity reservation fees that the LDC otherwise would have paid to the pipeline.</p>
<p>These diverse revenue streams and forms of payment demand a key question: Do they count in determining whether the price of the release exceeds the cap?</p>
<p>The marketer petition does not ask FERC for a wholesale rethinking of policy. Rather, it asks FERC only to issue a few simple safe-harbor rules. The petition asks FERC to rule that in the context of a pre-arranged release of pipeline capacity, pursuant to a portfolio management deal and at the maximum lawful rate, that payments will not be treated as exceeding the price cap, if payment is tendered as follows:</p>
<p>As a transaction fee, as a lump sum or as revenues to be earned on or in association with gas sales, to be paid by the portfolio manager (the replacement shipper) to the customer (the releasing shipper).</p>
<p>Second, the petition asks FERC to guarantee that a payment by the customer to reimburse the manager for pipeline-reservation charges will not be treated as a set-off that lowers the effective price of the release, which otherwise would trigger a requirement for competitive bidding.</p>
<p>The marketer petitions urge the commission simply to act quickly on their safe-harbor request, without incurring the delays that would come with issuing a formal rulemaking proposal to revamp policy on price caps, and the tying, buy/sell and SMHT rules.</p>
<h4>Legal Framework</h4>
<p>Current rules pose problems, especially now that Congress has granted new enforcement powers to FERC in the Energy Policy Act of 2005. Consider a recent ruling that assessed a $1 million civil penalty against Bangor Gas Co. for violating the shipper-must-have-title rule by using gas-pipeline rights to transport gas owned by third parties. <em>(See Docket No. IN-7-23, March 7, 2007, 118 FERC ¶61,186.)</em></p>
<p>As Chairman Joseph T. Kelliher noted at the time, the <i>Bangor</i> case marked FERC’s first-ever imposition of a civil penalty for natural-gas violations under the new enforcement authority. Thus, releasing shippers now must take care to avoid costly fines. But it can prove awkward to structure a pre-arranged deal to release pipeline capacity to a marketer or portfolio manager without running afoul of the SMHT rule, not to mention the prohibitions against buy/sells and tying arrangements.</p>
<p>In practice, each rule seems to conspire against another. For example, as the marketer petition notes, shippers who want to forge a pre-arranged deal to outsource gas-supply oversight to a portfolio manager typically will find it necessary to violate one rule in order to avoid violating another:</p>
<p>“It is in fact essential that this assignment of purchase rights occur in order to ensure that the portfolio manager, in its use of the released transportation and/or storage capacity, complies with the commission’s ‘shipper-must-have-title’ requirement.” <em>(See comments, Marketer Petition.)</em></p>
<p>Marisa Sifontes, senior counsel for Dominion Resources Services Inc., offers a similar explanation in her written comments filed on behalf of Dominion Retail and Virginia Power Energy Marketing Inc. on April 11:</p>
<p>“Thus we have a rule, the prohibition against tying arrangements, which makes a certain transaction structure, a structure which the market demands, arguably unlawful.”</p>
<p>Counter to these views comes a curious rebuttal, offered by Thomas Thackston, of PSEG Services Corp., in his written comments for PSEG Energy Resources and Trade LLC:</p>
<p>“Like any other market monitoring mechanism, shipper-must-have-title has been accused of interfering with the marketplace. Such accusations may be accurate, but even if true, they miss the point, since regulatory scrutiny and action is not only appropriate, but necessary.”</p>
<p>FERC articulated the SMHT rule in the late 1980s, before Order 636 and open access kicked in, to prevent shippers from locking in capacity rights under the old first-come, first-served priority rule, and then hoarding capacity for months or even years before acquiring gas and initiating an actual shipment:</p>
<p>“All shippers shall have title to the gas at the time that the gas is delivered to the transporter and while it is being transported by the transporter.” <em>(38 FERC ¶61,150 at p. 61,408.)</em> Many feel its usefulness has ended.</p>
<p>Part and parcel with the SMHT rule comes the prohibition against buy/sells. In a buy/sell, the shipper acquires title only temporarily, during the shipment, and only to achieve nominal compliance with the SMHT rule. It is understood that the end user retains beneficial ownership throughout, as FERC explained in Order 636:</p>
<p>“An LDC will purchase gas in the production area from an end user or a merchant designated by an end user. The LDC will ship the gas on its own firm capacity and sell the gas to the end user at the retail delivery point.”</p>
<p>Then comes the rule against tying arrangements: “All terms and conditions for capacity release must be posted and nondiscriminatory, and must relate solely to the details of acquiring transportation on interstate pipelines. Release of pipeline capacity cannot be tied to any other conditions.” <em>(Order 636-A, Dkt. No. RM91-11, Aug. 3, 1992, 1991-96 FERC Stats. &amp; Regs, ¶30,950, at p. 30,559.)</em></p>
<p>To avoid the risk, shippers may seek a waiver of FERC rules before the fact. And the commission ordinarily has granted such waivers only where a shipper wants to exit the natural-gas supply management business in a rational and orderly fashion. FERC recently denied a waiver for capacity release above the maximum rate cap and tied to a purchase and sale agreement for long-term firm natural gas supplies, where the shipper did not aim to wind up the gas business. <em>(See Louis Dreyfus Energy Services LP, Dkt. RP06-187, Mar. 3, 2006, 114 FERC ¶61,246.)</em></p>
<p>One idea suggests that FERC need not worry so much about the SMHT rule; the rule would become somewhat irrelevant if FERC instead would simply decide to eliminate the tying rule and the price cap on capacity releases in the secondary market.</p>
<p>Seven years ago, in Order 637, the commission launched a two-year experiment in which it lifted the maximum rate ceiling on capacity release transactions of less than one year’s duration. Toward the end of the experiment, the commission staff reported that above-cap releases had accounted for only 2 percent of total transactions and gas volumes released, and for no more than 6 percent of the released capacity volumes in any particular month. Some 76 percent of all above-cap releases had occurred on only four pipelines. <em>(See Staff Paper, Dkt. PL02-4, May 30, 2002.)</em></p>
<p>Today, five years, later, many still see those findings as encouraging. New Jersey Natural Gas finds it “inexplicable” that FERC eventually abandoned the experiment, having let it lapse in September 2002 “without published explanation or justification.” <em>(See Comments, New Jersey Natural, p. 14, filed Apr. 11, 2007.)</em></p>
<p>Sixteen months ago, in a case reviewing pipeline authority to negotiate market-based rates, then-commissioner Nora Mead Brownell reiterated that the two-year experiment on capacity release pricing had shown “positive results.” Brownell thought the experiment had demonstrated that an uncapped capacity release market could be competitive, and produce just and reasonable rates for customers. She added that without the price-cap waiver, the capacity likely would have been sold in the bundled and unregulated “grey market,” without public posting of release terms on pipeline Web sites. <em>(See Dkt. PL02-6, Mar. 23, 2006, 114 FERC 61,304, Brownell concurring.)</em></p>
<p>Note also that Brownell then had called for a reconsideration of FERC policy, including a re-evaluation of interruptible transportation provided by pipelines in the primary market:</p>
<p>“I believe it is time to again consider a wide range of proposals for pricing transportation services in the secondary market, as well as competing IT services.”</p>
<h4>Market Lessons</h4>
<p>The AGA argues that FERC’s SMHT rule has become particularly problematic due the development of gas retail choice, and a competitive supplier that procures and manages gas supply for retail choice customers who take delivery from the LDC.</p>
<p>Because of forecasting inaccuracies, or other reasons, notes AGA, competitive retail suppliers on a daily basis often will provide “less gas at the city gate than their retail customers consume, requiring that the LDC provide that gas from its own supplies.”</p>
<p>The problem is exacerbated by the multiplicity of competitive retail suppliers, and the diversity of LDC’s pre-existing supply portfolio, assembled at least in part before the competitive retailers arrived on the scene.</p>
<p>Thus, as AGA adds, “If an LDC were to release a share of its pipeline and storage capacity to choice providers, the individual released quantities would be so small that the replacement shippers would lose the no-notice flexibility that the LDC enjoys.”</p>
<p>Dynegy argues that FERC should reverse course and allow buy/sell transactions, as is the case in Canada, where the Canadian Natural Gas Exchange, an electronic exchange similar to the Intercontinental Exchange (ICE) operates as a clearinghouse for natural-gas transport capacity:</p>
<p>“It is credit-efficient for a market participant to sell delivered product to and buy supply from the same counterparty. No collateral is expended in this instance.</p>
<p>“Under the current rules, even if a market participant has a counterparty with supply zone gas to sell that needs to purchase market zone gas, the market participant is forced to find a third party to buy supply zone gas from in order to avoid a buy/sell. This necessitates additional credit posting or prepayment to the party from which supply is purchased. Moreover, the counterparty with supply zone gas to sell has to look elsewhere in the market rather than efficient transacting with their existing counterparty.”</p>
<p>This complicated explanation recalls the early days of the California ISO, when many electric-industry experts faulted the ISO’s rule that forced scheduling coordinators to submit balanced schedules.</p>
<p>FERC policy requires releasing shippers in many cases to post their offers on pipeline electronic bulletin boards or Internet sites, so that prospective replacement shippers can bid on the rights if the price on the initial release offer falls below the pipeline’s recourse rate. Again, this required practice tends to interfere with the business of pre-arranged deals for gas portfolio management.</p>
<p>Duke Energy highlights how FERC’s posting and bidding rules can interfere with pre-arranged deals.</p>
<p>As is explained in Duke’s comments, most pre-arranged releases by LDCs to allow for outside portfolio management are closely monitored by state regulators to ensure that any assets needed to serve retail load are conferred to third parties only after a showing of ratepayer benefits. Moreover, state PUCs often will require LDCs to conduct a request for proposals (RFP process) before selecting a portfolio manager, and will issue formal orders authorizing the deals.</p>
<p>Therefore, according to Duke, FERC’s bidding requirement “is redundant and tends to compromise the integrity and efficiency of a competitive process that has already taken place.” <em>(See comments, Duke Energy, p. 9, filed Mar. 23, 2007.)</em></p>
<p>Ameren, clearly in the minority, claims that “the vibrancy of the capacity release market has not suffered under the existing rules.” As evidence, it claims that its capacity release revenues more than tripled in the three years ending in April 2007, rising by 360 percent.</p>
<p>A majority of the commenting parties appear to favor a lifting of the price cap on capacity release in the secondary market. Some favor that only for short-term releases (less than one year’s duration). Still others (including the commission itself) have suggested a different type of price ceiling, using basis differentials from commonly published price indexes to put a value on released capacity.</p>
<p>One objection is that some hubs or market centers lack enough trading volume or liquidity to produce reliable index prices. However, others fault the idea for more fundamental reasons. Marisa Sifontes of Dominion explains in her comments why this idea makes no sense in the real world of markets:</p>
<p>“Using ‘basis differentials’ to value capacity has at its core a fatal circularity. Any particular ‘basis differential is the market-clearing value. … It makes no logical or practical sense to place a ceiling on a market price by reference to that price itself, for surely that would mean that there was no cap at all.”</p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/commission-watch">Commission Watch</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-department field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Department: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/department/commission-watch">Commission Watch</a></li></ul></div><div class="field field-name-field-image-picture field-type-image field-label-above"><div class="field-label">Image Picture:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/article_images/0707/images/0707-cvr.jpg" width="1121" height="1500" alt="" /></div></div></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
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<a href="/tags/aga">AGA</a><span class="pur_comma">, </span><a href="/tags/ameren">Ameren</a><span class="pur_comma">, </span><a href="/tags/american-gas-association">American Gas Association</a><span class="pur_comma">, </span><a href="/tags/cash-flow">cash flow</a><span class="pur_comma">, </span><a href="/tags/chevron">Chevron</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/congress">Congress</a><span class="pur_comma">, </span><a href="/tags/constellat">Constellat</a><span class="pur_comma">, </span><a href="/tags/constellation">Constellation</a><span class="pur_comma">, </span><a href="/tags/constellation-energy">Constellation Energy</a><span class="pur_comma">, </span><a href="/tags/dc">DC</a><span class="pur_comma">, </span><a href="/tags/dominion">Dominion</a><span class="pur_comma">, </span><a href="/tags/dominion-resources">Dominion Resources</a><span class="pur_comma">, </span><a href="/tags/dominion-resources-services">Dominion Resources Services</a><span class="pur_comma">, </span><a href="/tags/duke-energy">Duke Energy</a><span class="pur_comma">, </span><a href="/tags/dynegy">Dynegy</a><span class="pur_comma">, </span><a href="/tags/eia-0">EIA</a><span class="pur_comma">, </span><a href="/tags/energy-information-administration-0">Energy Information Administration</a><span class="pur_comma">, </span><a href="/tags/energy-policy-act">Energy Policy Act</a><span class="pur_comma">, </span><a href="/tags/energy-policy-act-2005">Energy Policy Act of 2005</a><span class="pur_comma">, </span><a href="/tags/federal-energy-regulatory-commission">Federal Energy Regulatory Commission</a><span class="pur_comma">, </span><a href="/tags/federal-energy-regulatory-commission-ferc">Federal Energy Regulatory Commission (FERC)</a><span class="pur_comma">, </span><a href="/tags/ferc">FERC</a><span class="pur_comma">, </span><a href="/tags/ice">ICE</a><span class="pur_comma">, </span><a href="/tags/intercontinental-exchange">Intercontinental Exchange</a><span class="pur_comma">, </span><a href="/tags/iso">ISO</a><span class="pur_comma">, </span><a href="/tags/it">IT</a><span class="pur_comma">, </span><a href="/tags/merrill-lynch">Merrill Lynch</a><span class="pur_comma">, </span><a href="/tags/new-jersey">New Jersey</a><span class="pur_comma">, </span><a href="/tags/order-890">Order 890</a><span class="pur_comma">, </span><a href="/tags/payment">Payment</a><span class="pur_comma">, </span><a href="/tags/scana">SCANA</a><span class="pur_comma">, </span><a href="/tags/storage">storage</a><span class="pur_comma">, </span><a href="/tags/transmission">Transmission</a><span class="pur_comma">, </span><a href="/tags/us-energy-information-administration">U.S. Energy Information Administration</a><span class="pur_comma">, </span><a href="/tags/ubs">UBS</a> </div>
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Sun, 01 Jul 2007 04:00:00 +0000puradmin13921 at http://www.fortnightly.comLNG: Desperately Seeking Supplyhttp://www.fortnightly.com/fortnightly/2007/04/lng-desperately-seeking-supply
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Several new LNG plants are under construction, but firm supplies remain scarce. Will empty terminals alleviate gas-price pressures?</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Michael T. Burr</p>
</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><b>Michael T. Burr</b> is <i>Public Utilities Fortnightly’s</i> editor-at-large. E-mail him at <a href="mailto:burr@pur.com">burr@pur.com</a>.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - April 2007</div></div></div><div class="field field-name-field-import-image field-type-image field-label-above"><div class="field-label">Image:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/article_images/0704/images/0704-FEA1-pqs.jpg" width="2024" height="1133" alt="" /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/article_images/0704/images/0704-FEA1-table1.jpg" width="1736" height="1360" alt="" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Four years after Alan Greenspan sounded the alarm on the paucity of liquefied natural gas (LNG) regasification capacity in the United States, developers have responded with a fleet of new projects for importing LNG. Existing terminals have been expanded, an innovative offshore project has entered service, and ground has been broken for at least seven new facilities <em>(see Table 1, “LNG Leaders”).</em></p>
<p>This robust response suggests U.S. gas customers can breathe a sigh of relief. Some 10 billion cubic feet per day (Bcf/d) of new LNG-import capacity will prevent the supply-demand dislocations that gas-market experts were predicting just a couple of years ago. Or will it?</p>
<p>Although a great deal of new LNG-regasification and storage capacity is planned, little of it actually has entered service, and many of the projects now under construction are moving ahead without having supplies committed for import. Likewise, dozens of gas-liquefaction facilities and LNG tankers are under construction, but few are tied to long-term off-take contracts in U.S. markets. In effect, LNG suppliers have acquired options on LNG capacity without committing to use it.</p>
<p>“The game is this, from an investor point of view: An LNG project can be justified on the basis of U.S. prices,” says Robert Ineson, head of the North American natural-gas team at Cambridge Energy Resource Associates (CERA) in Houston. “You can contract for it and finance it, but operationally what you try to do is sell gas to Japan at a higher price.”</p>
<h4>Coal Wild Card</h4>
<p>In addition to uncertainty from the supply side, the biggest gas customers—electric and gas utilities—have avoided long-term contracts for LNG because they fear the prospect of prudency reviews at state utility commissions. Public pressure over rising electricity and gas prices has exacerbated this anxiety. Even though long-term contracts would alleviate price volatility, utilities and regulators understandably are reluctant to commit ratepayers to gas-contract terms negotiated during a time of relative scarcity.</p>
<p>Thus the U.S. LNG game is evolving. While regasification capacity holders seem unlikely to let that capacity go unused, they also seem likely to sell their fuel to the highest bidders—historically in East Asia and Europe. The result may be a fleet of shiny-new LNG terminals that sit idle half of the time—at least until Henry Hub prices rise closer to levels familiar to customers in Korea and Spain.</p>
<p>Now, a further wild card has entered the game. Namely: King Coal, or more specifically, growing uncertainty about the construction of new coal-fired power plants.</p>
<p>In February, Texas energy company TXU announced it would cancel plans to build eight of its 11 proposed coal-fired power projects as part of a buyout deal with Texas Pacific Group, Kohlberg Kravis Roberts and Goldman Sachs <em>(see “<a href="http://www.fortnightly.com/fortnightly/2007/04/view-txu-leveraged-buyout">A View on the TXU Leveraged Buyout</a>”)</em>. This announcement, combined with recent support for mandatory greenhouse-gas constraints among prominent power-industry groups, suggested the 150 coal-fired generating units currently in development might face an uphill path to completion.</p>
<p>To the degree new coal-fired plants in America are canceled or delayed, demand for natural gas likely will increase. Rising gas demand over the next five to seven years would drive gas prices higher than previously projected, perhaps giving utilities and regulators greater impetus to secure long-term gas supplies earlier rather than later. Whether LNG suppliers can or will reciprocate with commitments for upstream capacity, is another question.</p>
<p>To better understand the evolving outlook for LNG and its role in the U.S. gas market, <em>Public Utilities Fortnightly</em> assembled a group of LNG specialists with various perspectives on the issues. They include:</p>
<p>• Don Felsinger, Chairman &amp; CEO, Sempra Energy;<br />• Gary Sypolt, President and COO, Dominion Transmission;<br />• Robert Ineson, head of the North American Natural Gas Team, CERA;<br />• Chuck Zabriskie, Managing Director &amp; Head of Project Finance, North America, Royal Bank of Scotland; and<br />• Jacob Dweck, Partner, head of LNG Practice, Sutherland Asbill &amp; Brennan.</p>
<p><b>Fortnightly: What’s the outlook for the LNG market in North America? Are enough projects going to get built to prevent supply shortages? Or will too many get built to make them cost-effective for the owners?</b></p>
<p><b>Chuck Zabriskie: </b>We are heading toward more-than-adequate capacity for regasification in North America. That’s good because we need more regas capacity than liquefaction capacity at all times—at least 30 to 50 percent more—to have a strong spot market. And for the health of the system you don’t want to run at 100 percent all the time anyway. You want some slack for reliability.</p>
<p><b>Jacob Dweck: </b>You have to look at it from a national and regional perspective. The U.S. Gulf Coast all the way to New York and the Midwest can be viewed as a single market. Then you have other markets, including New England, California, and to some degree, Florida.</p>
<p>More than enough terminals are being built in the Gulf Coast to meet demand in that market. Florida is a juicy market, and Elba Island and a couple of other projects will serve it. New England is a different story, with significant pipeline constraints. One terminal or two will be enough, and Canaport in New Brunswick seems to be moving forward. Several other proposals are chasing about 1 Bcf/day of capacity. It’s a game of musical chairs, and maybe two people can sit on the chair in New England.</p>
<p>California is a difficult market. Sempra’s facility in Baja will serve Southern California, but that’s not a huge market. As long as hydropower is working you don’t need the gas. The Long Beach project is dead, and other projects have an uphill battle with siting issues. Any project in the United States with firm local opposition will not get built.</p>
<p><b>Gary Sypolt: </b>Unfortunately, most of the projects being built are far from the marketplace. We are expanding Cove Point in the market area, but most other projects will be built in the Gulf of Mexico. From our perspective that doesn’t help our diversity of supply a whole lot since we are already dependent on supply from the Gulf. We saw how Hurricanes Katrina and Rita affected supplies in 2005.</p>
<p><b>Robert Ineson: </b>The availability of regasification capacity in the United States is the smallest of the problems in the LNG value chain. We have about 4.3 Bcf/d of regas capacity, and 9.6 Bcf/d under construction, including projects in Canada and Mexico that are targeting U.S. markets. Plus there are other credible projects floating around as well.</p>
<p>The big issue for the U.S. market with LNG is international competition for supply. The competitors, Japan, Korea and to a lesser degree Europe, are somewhat more motivated. When Americans talk about secure LNG supplies, they are talking about whether they got the market price. When Asians talk about secure supplies, they are talking about whether the molecules showed up. When they need it, they need it, and they are prepared to pay what it takes to get LNG.</p>
<p><b>Don Felsinger: </b>The long-term perspective is that there is so much stranded gas around the world looking for a market, no matter which country it is in, LNG makes it possible to supply gas to North America on the margin and do it effectively. LNG will compete very well with any new supply we can develop in North America.</p>
<p>2006 was a watershed year, because for the first time proven reserves in natural gas exceeded proven oil reserves. That is a very good thing, because we are on a path to develop more sustainable energy resources, particularly renewables, driven by a growing focus on energy independence and greenhouse gases. Renewables need to be firmed up by conventional generation, and the cleanest source is natural gas. From that standpoint, the future of natural gas looks rosy in the United States and around the world.</p>
<p> </p>
<p><b>Fortnightly: How is U.S. demand for LNG likely to be affected by the fate of planned coal-fired power plants?</b></p>
<p><b>Felsinger: </b>We were in the coal business for a few years. We bought some power plants in Texas and we were developing two greenfield projects. Our management saw growing uncertainty about the risk of building new coal plants when you don’t know what the restrictions will be on carbon emissions. That’s why we decided to sell our coal-fired assets and invest in natural gas, renewables and utility infrastructure.</p>
<p>Now we are seeing greenhouse-gas regulation pick up momentum. There really isn’t any question any more about whether there will be carbon regulation, the question is how much and how fast. Anyone building a coal-fired plant today has to ask if it’s a risk they can afford to manage, and if so, how will they do it? If you are a prudent investor, you don’t want to take a risk you can’t hedge. That’s why we will see curtailment of coal-fired development.</p>
<p><b>Ineson: </b>It looks like several coal plants have been taken off the table in Texas. We are still scratching our heads about what it means. If this signals a wholesale change in the coal outlook, it would translate into a bunch of gas demand.</p>
<p>Utilities are facing the next wave of electric-power build out, and the question of what technology will be used is upon them. There’s no dispute that renewables are a fine thing to do, but the argument becomes how much can be built and how fast. Decisions have to be made soon, and if those decisions get deferred, the short-term answer will be to burn more gas.</p>
<p>In our last outlook we posited gas prices would trend downward through about 2014. A number of factors went into that, LNG being one and the expanding coal build being another. We try to look holistically and make the numbers add up. In the last six months, the outlook has been turning toward a more extended period of gas-market tightness.</p>
<p> </p>
<p><b>Fortnightly: European utilities are involved in developing LNG terminals and securing long-term supply contracts. Should U.S. utilities be doing the same? </b></p>
<p><b>Dweck: </b>U.S. utilities are not going upstream. They are going to be both volume-takers and price-takers for a whole variety of reasons. They see too many risks and not enough benefits to sign up for LNG capacity. The local distribution companies, for example, just pass along price increases in their rates. Why should they sign contracts that connect them to risks going all the way upstream to Nigeria?</p>
<p><b>Ineson: </b>In Europe and Asia, you have national-champion utilities that are able to pass costs through. In the United States, utilities can also pass costs through, but we have ex-post facto prudency review, and that discourages long-term commitments. It effectively means other countries are entering long-term take-or-pay contracts and we are not, so they will get first cut at supply. If there are any hiccups in the system, the U.S. market will be the first to be left short of supply.</p>
<p>If you think about it from a regulator’s perspective, if what you are trying to do is ensure the lowest possible price for the consumer, the more LNG you can bring into the market, the looser the supply-demand balance will be. With LNG, the price in the market will be lower than it would be without LNG, so directionally it will be better for consumers.</p>
<p><b>Sypolt: </b>In 2006 we saw cargoes drop off to Cove Point and most other U.S. terminals as LNG supplies cracked the highest-priced markets throughout the world. A steady flow of LNG based on long-term contracts would help reduce volatility in U.S. gas prices, and would be a benefit to the nation.</p>
<p><b>Felsinger: </b>I think we will have utilities signing up for long-term contracts.</p>
<p>Buying gas on the spot market is a good approach when you have a surplus. But now that we are facing a shortage, what customers want going forward is secure supplies and stable prices. Like other areas of the world we are competing for the same limited supply, and the best way to secure supply is to sign a long-term contract.</p>
<p>Because these are long-term decisions, the way we buy energy tends to lag behind what is happening in the market by about three or four years. We were in the gas bubble for a few years before we went away from long-term contracts and started buying in the spot market. Now that we are in a supply deficit, utilities and regulators will realize that to make sure the product is available they need to step up and sign long-term contracts for some part of the portfolio.</p>
<p> </p>
<p><b>Fortnightly: Without customers signing long-term contracts, how are LNG suppliers managing price risk?</b></p>
<p><b>Dweck: </b>Most suppliers are going to take the price risk, and most projects are being structured on that basis. The importer is taking a small price risk and getting a small benefit, and the supplier is taking almost all the price risk, and the benefit, up and down the LNG chain.</p>
<p>On the other hand we are seeing some producers extending themselves into downstream markets. Gazprom of Russia wants to be everywhere. Angola and Trinidad are looking at re-gas terminals, and Nigeria wants to control transportation in North America. National oil companies are joint venturing with the majors, and the majors will market gas downstream as far as possible.</p>
<p><b>Zabriskie: </b>Marketing LNG is a bit like chasing your tail. You don’t firm up your marketing until you know about the relative prices between the markets in Asia, North America, and Europe, which is a moving target.</p>
<p>Especially in the early years of this market, the large oil companies will be very comfortable selling gas at indexed prices. As liquefaction chains ramp up, in the 2009 and 2010 time frame, they will make decisions about where to send cargoes. They will gradually sell more gas into the market on a month-ahead basis, and establish relationships downstream of receiving terminals for marketing.</p>
<p>LNG suppliers will wait until the whole chain is operative before getting into long-term off-take contracts for delivered gas. They know their steady customers in time will take a significant part of the volumes they have, on a season-by-season basis.</p>
<p><b>Felsinger: </b>Looking at it from a different perspective, if you are a country that has natural gas in the ground and you have no local market for it, how do you manage that price risk? When should you bring it to market to get the maximum value? Should you do it now or wait 15 years?</p>
<p>If you want to sell gas to another part of the world, you have to ask whether you want to sell it for a fixed price for a long time, or get a market price. If you look at the consuming markets in the world, in India, Asia, and many European countries, natural gas is priced against a basket of indices. The UK has the National Balancing Point [NBP] and the United States has Henry Hub, and both are very liquid markets.</p>
<p>Different countries are answering the question differently; some would like to sell their gas to Asia, priced against an index tied to oil prices. Others are happy to sell into markets indexed to Henry Hub prices. In every case, it is better to take those market mechanisms than it is to leave it in the ground. If you leave it in the ground, someone else will lock in a market for 10 to 20 years.</p>
<p> </p>
<p><b>Fortnightly: What are the prospects for a spot-LNG market developing in the United States?</b></p>
<p><b>Dweck: </b>Basically all these terminals and vessels coming online are like very flexible pipelines that can reach across the globe. We will see a spot market developing globally. It will go the way of crude oil.</p>
<p>We’re already seeing LNG cargoes redirected to higher-priced markets. Recently importers in Japan, India, and Korea have purchased Atlantic cargoes. It doesn’t matter where the cargoes come from; you have to compare the price to NBP or Henry Hub.</p>
<p>When supply is constrained, you won’t have a lot of loose LNG cargoes. When more liquefaction plants will get built, there could be lots of LNG out there driving prices down.</p>
<p><b>Ineson: </b>The game is this, from an investor point of view: An LNG project can be justified on the basis of U.S. prices, you can contract for it and finance it, but operationally what you try to do is sell gas to Japan at a higher price.</p>
<p>Asian markets are growing, but the big growth potential for LNG is the U.S. market. The U.S. market is liquid, and there’s a lot of trading activity. At the end of the day some of the gas is going to come here, even though this market won’t pay a premium for the supply.</p>
<p><b>Zabriskie: </b>If the rest of the world is awash in LNG, or even if there is a reasonable surplus, it will be coming to the United States. That can only help the supply situation and the prices you pay for gas here.</p>
<p>Once you bring an LNG train online you try to keep it at full capacity, and that means you find a home for your volumes even if you don’t like the price. Even if Asia and Europe offer a better seasonal price, at some point the market will be saturated and there is only one place for it to go: North America. We could even see LNG pushing the market down by 2011 or 2012.</p>
<p>Over time we will have more capacity holders looking forward and saying they’ll have uncommitted receiving capacity. Already people are offering spot cargoes of LNG from existing trains in operation, and finding extraordinary bidding competition. People are buying cargoes F.O.B. [“freight on board,” the equivalent of cash and carry] from Nigeria or the Middle East and taking it where they can get the best value. That is already happening, and it’s quite interesting.</p>
<p><b>Sypolt: </b>Cove Point reopened to import LNG cargoes in August 2003. Since that time it has been the most active import terminal in the United States, with supplies being sold on the spot market by shippers. Storage is part of the equation. We have a fair amount of storage capacity at Cove Point, and we are building two additional tanks. And even if our tanks are full we can bring gas to underground storage facilities in various states. This allows suppliers to bring LNG in and decide when to bring it to market.</p>
<p> </p>
<p><b>Fortnightly: What role will financial players have in this market? Will they take positions on cargoes to hedge prices? </b></p>
<p><b>Zabriskie: </b>It’s conceivable. Merrill Lynch seems to be the most active of the financial players around LNG, but that may change as more LNG comes into the market. Merrill and other players trade and market a lot of gas volumes, and LNG is a way of putting yourself into new gas fields.</p>
<p>But it’s not about making huge amounts of money handling every volume that flows through. When you are dealing with large customers, you are looking for more scale, more market reach and the ability to do more sophisticated transactions.</p>
<p><b>Dweck: </b>If you look at who wants to play in LNG—the big investment banks—they need a robust spot market to start making money. At some point, there will be enough flexibility in the system, supply-demand mismatch, and globalization to allow for price arbitrage around the world. That is perfect for traders.</p>
<p>But it doesn’t have to be classic traders. Some small companies will make money on a cargo here and there. For the most part volumes will be controlled by the big players, and in this case it will be the producers—the national oil companies and some of the majors. We will see 70 to 80 percent of the trade being controlled by the big players.</p>
<p> </p>
<p><b>Fortnightly: Why aren’t U.S. regulators concerned about competitive access and capacity hoarding the way European regulators are? Why did that issue go away in the United States after FERC’s Hackberry decision?</b></p>
<p><b>Dweck: </b>The reason is North America has too much natural gas capacity for any player to influence prices. And there’s less of an energy-security issue here than there is in Europe. Hackberry was designed to provide a financial incentive to build LNG capacity.</p>
<p><b>Felsinger: </b>I don’t think there is a clear winner here. We currently are building a terminal in Mexico that has a third-party access requirement, and the capacity there is fully subscribed. On the other hand our Cameron terminal, which was the subject of the Hackberry decision, has no open access but it’s not full because the upstream supply doesn’t exist yet. Capacity is driven by what is available in terms of supply.</p>
<p>FERC looked at these projects as if they were a production field, like a basin being drilled, and they decided to let developers charge what the market would bear, as an incentive to get capacity built. As a terminal developer, I want to require users to sign up long enough to justify the investment. With open access, often you can’t get people to sign up for a long enough term to justify your market-based rate. And as an operator, open access can be a scheduling nightmare, trying to coordinate all the different shippers coming in.</p>
<p><b>Sypolt: </b>We are in a unique position. We provide terminal capacity, storage and transportation services to the market, partly under cost-of-service rates and partly under market rates.</p>
<p>Our expansion project at Cove Point is fully subscribed by Statoil, and that is critical because LNG facilities are capital-intensive projects with a long lead time. The Hackberry policy is the only way to encourage these investments.</p>
<p><b>Zabriskie: </b>I know for a fact that if you wanted capacity at a terminal, you could go to certain capacity holders and get it. You will have to negotiate and I don’t know what the clearing price will be, but it’s an open fact that much of the capacity does not have supply behind it right now. You could go to people like Cheniere who have about 2 Bcf/day of capacity you could get any day of the week. So there is capacity available if one wants it, and you should be able to make a deal.</p>
<p>But it’s not a precondition for a spot market because there are so many players—ConocoPhillips, Dow, ExxonMobil, Total, ChevronTexaco, BG, BP, Shell, SUEZ, Eni, Merrill Lynch, Sempra—all these people will be in a position to take the odd spot cargo, if not a lot of spot cargoes. I have no concerns there will be some sort of spot market here, nor am I concerned about not having access.</p>
<p> </p>
<p><b>Fortnightly: So what’s the bottom line for U.S. electric and gas utilities? How should they approach the LNG market?</b></p>
<p><b>Zabriskie: </b>Utilities need a lot of flexibility in their supply. Their consumption is flexible by the day and hour, and they need it at different locations on different days. No utility wants to go out and buy all their gas every day, so it’s a mix of monthly contracts, daily purchases, some storage, and some transportation on pipelines, but most utilities access supplies all over the grid.</p>
<p>That’s where the marketers play an important role. They have enough transportation and storage to deal with many more suppliers. They can merge all those options to come up with a somewhat more economically efficient solution. The marketer enjoys that efficiency in terms of profit, and the customer enjoys a lower price than he’d get by dealing directly with hundreds of suppliers.</p>
<p><b>Ineson: </b>Right now it is a seller’s market, and you have customers in Europe and Asia that are more concerned about getting volumes. There is a large supply response underway to the high prices we are seeing globally, with very substantial investments. At the same time, our LNG terminals have been running at fairly low capacity. If you roll that picture forward far enough, the global picture will turn into surplus. If it shifts to a buyer’s market, that is a good position to be in from an end-user’s perspective.</p>
<p>But it is a double-edged sword and a question of timing. Utilities and regulators must answer the economic policy questions about whether waiting for the market to tip is a wise thing to do. Either way, it is a bet you are placing for the future.</p>
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<a href="/tags/balancing">Balancing</a><span class="pur_comma">, </span><a href="/tags/chevron">Chevron</a><span class="pur_comma">, </span><a href="/tags/dominion">Dominion</a><span class="pur_comma">, </span><a href="/tags/ferc">FERC</a><span class="pur_comma">, </span><a href="/tags/finance">Finance</a><span class="pur_comma">, </span><a href="/tags/goldman-sachs">Goldman Sachs</a><span class="pur_comma">, </span><a href="/tags/merrill-lynch">Merrill Lynch</a><span class="pur_comma">, </span><a href="/tags/nbp">NBP</a><span class="pur_comma">, </span><a href="/tags/renewable">Renewable</a><span class="pur_comma">, </span><a href="/tags/sempra">Sempra</a><span class="pur_comma">, </span><a href="/tags/sempra-energy">Sempra Energy</a><span class="pur_comma">, </span><a href="/tags/shell">Shell</a><span class="pur_comma">, </span><a href="/tags/storage">storage</a><span class="pur_comma">, </span><a href="/tags/transmission">Transmission</a> </div>
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Sun, 01 Apr 2007 04:00:00 +0000puradmin14304 at http://www.fortnightly.com